The U.S. Department of the Treasury on Thursday (20) formally proposed at least 15% of the world’s lowest corporate tax rate, lower than the original 21% tax rate on overseas profits of U.S. companies, as seen in the Organization for Economic Cooperation and Development (OECD)-led international negotiations have given way to Ireland and other countries that some believe the 21% tax rate is too high.
The U.S. Treasury Department said in Thursday’s announcement that “multiple efforts must be made to eliminate corporate tax competition and pressure for corporate tax base erosion” and that “the Department of the Treasury emphasizes that 15 percent is the bottom line and that active discussions should continue to strive for a higher minimum tax rate.”
This proposal brings the U.S. position closer to the 12.5% minimum tax rate level discussed by the OECD before the U.S. returned to negotiations. The U.S. returned to the OECD negotiations after Biden became president. The U.S. move helps facilitate the negotiations as the OECD expects to reach an agreement this summer.
The Biden administration proposed a 21 percent tax on the global profits of U.S. companies in March, and lower-rate countries such as Ireland (which has its own tax rate of 12.5 percent) have been skeptical. The U.K. is also concerned that a 21 percent tax rate is too high and not a long-term solution; however, the U.K. itself intends to raise its corporate tax rate to 25 percent by 2023 to shore up public finances in the wake of the epidemic.
The U.S. Treasury Department rushed to the June 4-5 meeting of the finance ministers of the seven major industrial countries in London to propose this proposal, also hoping to gather consensus in the major industrial countries before the Democrats propose a tax increase on U.S. corporations in Congress. The White House has proposed to raise the domestic corporate tax from 21% to 28% in order to support the Biden administration’s $4 trillion long-term economic plan.
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