You know it’s coming.  There is going to be a clamor- at least from the Democratic Party- to raise the rates on corporate income and those earning at least $ 400K a year.

Why?

Besides the fact that the Trump Tax cuts have decimated the American treasury,  we are going to need significant sums to restore the vitality and safety of American infrastructure.  So, collecting  funds from those who don’t pay their fare share is always a great idea.

However, before we raise the corporate tax rates, we should develop an INTERNATIONAL standard for the minimum corporate tax that must be paid each and every year.  I’m guessing that 12% is about right.  (OK, it’s not just me, but you’ll realize that soon enough.  For example, Joseph Stiglitz, the Nobel Prize Economics winner, believes this concept will be like the “Paris Climate Accord of taxes.”)   (I’ve been advocating for this for years- here’s one such post from 2017.   And just so y’all know it- this is a position Janet Yellen has advocated, too.)

That means folks like Apple that allege in their annual reports that they will be paying millions in US taxes (and, therefore, reserve said funds in their treasury; excluding those funds in their potential dividend distributions) will finally have to do so.  If you’ve been following their actual tax payments, you will see Apple  HASN’T paid those sums.  (While it’s tough for an outside to track individual funds- it looks to me that those reserves were used to buy back corporate stock, shoring up stock prices which are the basis for executive salaries and bonuses.)

The USA has been negotiating with the OECD  (the Organization for Economic Cooperation and Development) for a while- until TheDonald expounded his America First (which really means America Alone) policies, which meant the US would not be among the signatories to the new international tax changes that were being planned.  (That concept was called Base Erosion and Profit Shifting [BEPS].)

 

The multilateral instrument was designed to stop companies from “treaty shopping”- from looking from the lowest tax nation to claim as its tax harbor. No more “Ireland”, “Luxembourg”, “Canary Island”, or similar tax domiciles.

The goal was to collect the taxes that each nation deserves because of the profits garnered from its citizenry or via sales to its citizens. BEPS removes the tangled mess of more than 3000 bilateral tax treaties and at least that many loopholes (or are they wormholes? given the size of the money that passes through them untaxed) companies employ.

Well, surprise, surprise.

Over the past few weeks, our talented Treasury Secretary, Janet Yellin, has been visiting and negotiating with our fellow nation states to develop exactly such a plan.

Ms. Yellen has been holding talks with more than 140 international counterparts via the Organization for Economic Cooperation and Development (OECD), where countries are looking at global tax issues, with a particular focus on tech.

What we want to promulgate is a nonbinding consensus; a minimum tax rate within the OECD, so that multinational corporations will stop shopping for countries to park “their assets” (almost always a paper shuffling exercise, with no ties to true reality) in countries that will tax them at lower rates.

The Secretary General of the OECD, Mathias Cormann, has been quoted that he is “optimistic” of obtaining consensus on a global minimum tax.  It clearly would afford world governments the ability to collect more tax from the multinationals.

One should realize that while the worldwide average statutory corporate income tax rate is about 24%, that is significantly higher than what national treasuries end up collecting.   Getting that minimum tax rate of 12% would greatly increase the tax collections for all the national treasuries.

Oh, yeah.  It also could provide the funds America needs to pay for that $ 2 to $ 3 trillion infrastructure package.