The high budgetary costs caused by the covid-19 pandemic, which most countries on the planet and especially western governments face in conjunction with US President Joe Biden’s new US fiscal policy through the announcement of the Infrastructure program and the intensifying US trade confrontation with China, makes it mature to implement the US proposal to introduce a global corporate tax rate.
by Thanos S. Chonthrogiannis
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Joe Biden’s policy of increasing corporate tax in the US from 21% to 28%, with the aim of funding the Infrastructure Program and generally supporting the American economy, will create a wave of withdrawals of US corporate tax seats from the US.
Given these reactions of American companies, the major economies are trying in every way to contain this expected flight of businesses to other countries so as not to diminish its tax base and ever greater tax burdens fall on the backs of ordinary citizens.
On this basis, U.S. Secretary of the Treasury Janet Louise Yellen said that “it is unreasonable and unfair for an employee living and working in the U.S. to be taxed on the income tax scale in force in the U.S. if he cannot choose to be subject to another country’s tax regime, with lower tax rates and higher tax-deductibles.”
That is right and it sounds attractive, but that is what the Socialist governments have always wanted, namely, to put their hand on the wealth of companies. If American capital (companies) were able to move around the world by changing headquarters it was a good situation only today open global markets and due to the low labour costs favor China and any other Asian country.
In addition, if a global corporate tax threshold is imposed, countries such as Ireland and Singapore, which are based on low corporate taxation, will have to experience a high rate of poverty, and decline in the future. This forced a large proportion of their population to migrate to other larger and richer countries. It is not simple for all countries to agree to this proposal.
A common maximum tax rate is imposed when you have the same currency as the other countries, i.e., you belong to the same federation. When all countries agree on a common maximum tax rate, the countries that attract the world’s generated wealth will be the ones with the greatest comparative competitive advantage, namely China, Germany, the USA, Canada, the UK, etc.
Closing tax havens with a minimum percentage of the population would be more tolerable and would not disturb the welfare base of countries such as Ireland and Singapore.
What needs to be implemented is a stable and growing tax base combined with a reliable tax collection mechanism, a guarantee that sufficient revenue will be generated to implement public goods and deal with budgetary crises.
