The idea is to prevent a “race to the bottom” that encourages companies to move offshore. President Donald Trump and the Republicans had included a provision called “Global Intangible Low-Taxed Income” (GILTI) in the 2017 Tax Cuts and Jobs Act, aimed at preventing American companies from fleeing to tax havens. It required U.S. companies to pay a tax rate of 10.5% on profits earned in a foreign country if that country’s tax rate was too low. But Biden and Secretary of the Treasury Janet Yellen pushed for a global agreement on a minimum corporate tax rate, reviving negotiations that had begun years earlier.
Their goal was to make foreign taxes on corporations even higher, so Democrats in Congress could raise taxes on American businesses without fear of chasing them away to low-tax countries. Though roughly 130 countries had already agreed to the Biden administration’s proposal several months ago, there were several holdouts, notably Ireland, a tax haven for American companies, which agreed Thursday to raise its corporate tax rate from 12.5% to 15%. Some critics say that the 2023 deadline for implementation is too soon; the deal would require the U.S. to raise its tax on overseas profits, which could face political opposition in Congress. Others say that the deal has “no teeth,” given that there are still many countries that have declined to join the deal and could entice businesses with lower rates.
The amount of money lost to governments worldwide every year due to tax havens is estimated at just $245 billion — a small fraction of the amount that the Biden Administration wants Congress to raise to pay for trillions of dollars in new spending. Nevertheless, the White House lauded the deal on Friday, with press secretary Jen Psaki declaring that the agreement “will finally even the playing field for American workers and taxpayers” by making sure “profitable corporations pay their fair share and provide governments with the resources to invest in their workers and economies.” President Biden and his wife avoided paying their own “fair share” for several years by filing tax returns as an S-corporation rather than as an individual earner. Joel B. Pollak is Senior Editor-at-Large at Breitbart News and the host of Breitbart News Sunday on Sirius XM Patriot on Sunday evenings from 7 p.m. to 10 p.m. ET (4 p.m. to 7 p.m. PT). He is the author of the recent e-book, Neither Free nor Fair: The 2020 U.S. Presidential Election. His recent book, RED NOVEMBER, tells the story of the 2020 Democratic presidential primary from a conservative perspective. He is a winner of the 2018 Robert Novak Journalism Alumni Fellowship. Follow him on Twitter at @joelpollak.
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