United States Secretary of the Treasury Janet Yellen has reportedly announced that a group of 130 countries have shown support for imposing a global minimum tax on corporations, which is a part of a broader accord to revamp global tax laws.
The GMT, if broadly adopted, would essentially put a stop to multinational businesses moving their headquarters to low-tax countries like Ireland and the British Virgin Islands, despite the fact that their customers, operations, and executives are situated elsewhere.
Yellen, in an official statement on the proposed tax plan, said that for decades, the US has engaged in a self-defeating international tax rivalry, cutting its corporate taxes only to have other countries respond by lowering theirs. As a result, there was a global race to the bottom to see who could reduce their corporation rate the most and the fastest, and no country has won this competition,.
Yellen added, the accord, agreed upon by 130 nations, which make up more than 90% of global GDP is a clear indication that the run to the bottom is approaching its conclusion.
The Organization for Economic Cooperation and Development, which issued a blueprint last autumn detailing a two-pillar approach to international taxes, has already established much of the grounds for implementing a GMT.
The exact rate at which the GMT would be established was not mentioned in Yellen's announcement. However, the Biden administration has advocated for at least 15%.
Central bank governors and G-20 finance ministers will gather later this month in Venice, Italy, and the global tax plan would be a major topic of discussion.
The GMT agreement is an important element of what President Joe Biden has described as a middle-class' foreign policy.
The plan, which was developed in part by Biden's national security advisor Jake Sullivan, highlights how domestic and foreign policy may be combined to create a new common road among conventional conservative and liberal approaches to international relations.