Raising taxes on wealthy firms that have done well during the COVID-19 pandemic is increasingly viewed as a source of revenue to finance recovery efforts, an idea the IMF and the US pushed on Wednesday.
The renewed support for the reforms comes as G20 finance ministers said they would continue work on a minimum corporate tax that would undermine the use of tax havens, with the aim of announcing a deal in July.
As momentum builds for the plan, which has support of France and Germany, Washington is taking the first step — announcing details of a plan to raise corporate taxes and clamp down on loopholes to ensure companies making huge profits, at home or overseas, pay a minimum amount to the government.
Photo: AFP
“Destructive tax competition will only end when enough major economies stop undercutting one another and agree to a global minimum tax,” US Secretary of the Treasury Janet Yellen said.
Yellen this week said she is pushing the G20 to adopt a global minimum tax to prevent firms from evading taxes by establishing headquarters in countries with lower rates — a practice prevalent among tech companies.
The IMF supports that idea and also argues that higher taxes on wealthy firms and individuals, even if temporary, could finance policies needed to ensure recovery from the pandemic.
“The IMF has been calling for a minimum, global corporate income tax rate as a way to interrupt the race to the bottom in corporate income taxation,” said Vitor Gaspar, head of the IMF’s fiscal affairs department.
US President Joe Biden last week announced plans to raise corporate taxes to pay for a massive US$2 trillion infrastructure and jobs program.
The US proposal “is in the context of an effort at the global level to combat tax avoidance and evasion, and to make sure that large multilateral, multinational corporations pay their fair share in taxation,” Gaspar told reporters as he unveiled the IMF’s Fiscal Monitor report during the fund’s spring meetings.
Irish Minister of Finance Paschal Donohoe on Tuesday expressed “reservations” over the proposal.
Ireland is considered a major tax haven, but Donohoe rejected the notion the country has sought a “race to the bottom.”
The IMF also has promoted the option of using a “recovery contribution” or surcharge on personal or corporate incomes given that some major companies have done well during the pandemic.
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