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If the U.S. raises its corporate tax rates, what’s keeping companies from simply moving operations abroad? Not much — though that could change. It’s no secret that some companies funnel money into places like Switzerland or the Cayman Islands to avoid domestic taxes. And places like Ireland have lured in businesses by offering low tax rates.
But recently, the world’s most powerful nations backed a 15% global tax minimum — tapping into a ~$150 billion in global tax revenue currently missed annually. The percent minimum was introduced by the U.S. in hopes of setting the stage for a future increase in domestic corporate tax rates.
Of course, not everyone is pleased In line with their usual criticism, Republicans oppose both the global and domestic tax agenda. And since the U.S. would have to update its own tax code to meet the requirements of the global deal, Republicans are threatening to block its progress in Congress. Meanwhile organizations like Oxfam argue the deal is a mockery of its goal to reduce inequality and generate tax revenue for poorer countries. Oxfam recommends a complete overhaul of the deal, including increasing the global tax minimum to 25% in order to raise ~17 billion more for the world’s 38 poorest countries.
The deal also addresses the technology giants of the world who don’t get taxed in countries where they have no physical office, even if they sell their goods and services there. Out of frustration, countries like France and Britain have been imposing taxes on Amazon, Google, and other American tech companies. Seen as a controversial move at the time, France alone generates over $400 million annually from these taxes. Now these countries have agreed to drop those taxes if the Global Tax Deal is fully enacted; the current goal is 2023.
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In researching this story, we learned how South Dakota has become a global tax haven — and found it fascinating. To find out how, check out this quick and simple summary from Axios.
Resource Center:
- Codastory (Where we found this story) 2 weeks old | 16 minutes long
- New York Times Details of the Global Tax Deal 1 month old | 13 minutes long
- CNBC Global tax havens 1 month old | 6 minutes long
- Oxfam Opposition to tax deal 1 month old | 4 minutes long
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He’s got the whole world(‘s taxes) in his hands...
Art Credit: ascii.co.uk