September 21, 2021

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Global tax reform according to the United States

“This is a historic day for economic diplomacy.” – The U.S. Treasury Department commented on the decision of 130 countries to produce 90% of world GDP to join international tax reform. It is worth looking at what the essence of this reform is, what Washington’s role in it is, and what the implications of this agreement will be for the rest of the world.

Assumptions of global tax reform

On Thursday 1 July 2021, 130 countries, including all G20 countries, announced their decision to join the new framework agreement on international tax reform. The reform provides 15% tax protection for digital companies. This information was provided by the Wall Street Journal. The consensus package, which covers two key areas, is the result of ten years of negotiations under the auspices of the Organization for Economic Co-operation and Development (OECD). This set sets the rules for large multinational corporations “Make a profit by paying taxes where they operate.” The OECD estimates that tax shortages in the digital sector cost countries between $ 100 billion and $ 240 billion a year.

Politicians express themselves in superiors about the agreement reached. OECD General Secretary Matthias Gorman said “After many years of intensive work and negotiation, this historic agreement will ensure that large multinational corporations pay their fair taxes wherever they operate.” US Treasury Secretary Janet Yellen names the date of signing the agreement: “History for Economic Diplomacy.” “Today’s agreement between 130 countries is a clear signal of a” race of concessions. “ (Competition between countries to invest through tax breaks) is one step closer to its end.

Who is the global tax reform targeting?

The new tax address – large technology companies support changes in tax regulations and – interestingly – the proposed changes apply to situations where they are subject to higher taxation. The reason is clear – corporate owners fear that national governments will act against Western corporations themselves, taxing them as they please. Therefore, in the West, mainly in the United States, it has been decided to limit themselves to a 15% management tax, which will protect corporations from higher taxes and allow them to buy cheaper. According to representatives of large technology companies, the agreement will eliminate the risks associated with domestic taxation, especially with the tax systems of France and Great Britain. The new agreement is expected to cover not only technology companies, but all major multinationals in general.

Not everyone likes reform

However, not all comments on this deal are equally enthusiastic. Some European countries continue to oppose the deal, arguing that it would lose its ability to attract foreign investment. Others in these countries include Ireland, the European headquarters of the largest technology companies in the United States, as well as Hungary and Estonia. Other adversaries include Nigeria, the most populous country in Africa, Kenya, Peru and Sri Lanka.

In addition, there are suspicions that the new agreement is part of an economic game within the United States. According to the Wall Street Journal, the deal is closely linked to the internal tax agenda in the United States. “The United States has received international support for a global minimum tax rate as part of a broader review of tax laws for multinational corporations. This support is an important step in reaching a final agreement on a key element of Biden’s internal plans.” – We read in an article published in this newspaper.

How do experts evaluate the proposed reform?

On the one hand, when evaluating the proposed tax solution, experts believe that such a measure would appear to be a reasonable solution for most countries. It has been the norm for large multinational corporations and large digital companies to – ever – seek the most convenient tax jurisdiction for themselves. As a result, these companies gain an advantage over domestic manufacturers thanks to efficient operation, but as a result of different stages of the production cycle: in one place, goods and services are produced, in another – sales, third – data and money are saved, and in the fourth – taxes are paid. According to experts, the entire global business is based on this model. On the other hand, all tax jurisdictions in the world are now national in nature. Because “You can understand the joy of US Treasury Secretary Janet Yellen” – WSJ writes – “This is the first time a primary tax jurisdiction has been created.” The decision to introduce a global tax will set a precedent in international practice.

This is where the skepticism of the opponents of neoliberalism begins “Rise Additional tax jurisdictionThe long-held dream of the “world bosses”, The goal of globalists was to abolish the tax concession of sovereign states. According to antiglobalists, this is a clear example of the sovereignty of nation-states: “This is a dubious move and a somewhat dangerous trend. Whoever collects the tax sets the tone for contacts with companies.” Their experts say. “Then any big company can tell the nation-state: Listen, why do we need your rules? The law is passed by those to whom we pay taxes.” Besides, they believe in the draft of the new world tax law “Large funds will go into the hands of international authorities and they will regulate the operations of digital companies.”

Lots of questions, some answers

In addition to these doubts about the surcharge, more and more questions arise: how to collect these taxes, how to distribute them, and who builds the tax machine? There are already concerns that over time, other contradictions will begin to grow. Conflicts because Western companies previously occupied key locations that could be occupied by Russian, Chinese, Indian, Iranian or Brazilian companies. These companies assure themselves that there is no question of immediate implementation of this agreement. Mainly because of a reaction to a hitherto unknown part of the American establishment. Some of America’s bigwigs will be dissatisfied with the decision to tax “big business” globally and will support the tax collection of national states.

Overall, however, the government in Washington is in favor of a global tax. The reason for this position is the fear that national governments will launch an offensive against forcing US governments to comply with local laws. This could lead to a decline in US presence in many areas. Americans are relatively weak in this regard, and they understand that. Hence the attempt to protect their own sites by creating an international consensus in the field of taxation. The United States has already made it clear that it sees itself as the regulator of the new tax process.

Summary

For those who oppose the introduction of a global tax, the good news is that the fact that 130 countries have decided to adopt such a reform does not mean that the tax will be introduced automatically. So far, only his idea, the idea, has been recognized. This idea will then be discussed at various stages. “I think this agreement will ‘die’ long before it is implemented, because in the future we will see some kind of digital sovereignty in many countries. – Says one of the experts, the head of the Center for Political and Economic Research of the New Society in Moscow.

Most economists confirm the notion that a global corporate tax would not be introduced, but efforts are still being made to lose the sovereign jurisdiction of certain rights, including taxation.

Authors: Attorney Robert Nokaki – Founder of Scorpio Law Firm, Col. Dr. Eng. Christoph Zurtik

Scorpio Law Firm Expert Property protectionStrategic advice for entrepreneurs and crisis management.

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