Treasury Secretary Janet Yellen announced that a group of 130 nations has agreed to a global minimum tax (GMT) on corporations, part of a broader agreement to overhaul international tax rules, CNBN reported. If widely enacted, the GMT would effectively end the practice of global corporations seeking out low-tax jurisdictions like Ireland and the British Virgin Islands to move their headquarters to, even though their customers, operations and executives are located elsewhere. The deal also reportedly includes a framework to eliminate digital services taxes, which targeted the biggest American tech companies. In their place, officials agreed to a new tax plan that would be linked to the places where multinationals are actually doing business, rather than where they are headquartered. Much of the groundwork for adopting a GMT has already been laid by the Organization for Economic Cooperation and Development (OECD), which released a blueprint last fall outlining a two-pillar approach to international taxation. The OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) is the product of negotiations with 137 member countries and jurisdictions. Yellen’s announcement did not include the actual rate at which the GMT would be set, but the Biden administration has pushed for at least 15 percent. G-20 finance ministers and central bank governors are scheduled to meet in Venice, Italy, later this month, and the international tax plan is expected to be high on the agenda. The GMT agreement represents a key part of what President Joe Biden has called “a foreign policy for the middle class.” The strategy emphasizes how foreign policy and domestic policy can be integrated into a new middle ground between the traditional conservative and liberal approaches to global affairs.
