President Biden’s Administration to propose Global Minimum Tax Rate at 15%

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The administration of President Biden is looking to propose a global minimum tax of at least 15%. The move aimed to level the playing field and stop what Treasury Secretary Janet Yellen has called the race to the bottom. Moreover, US Treasury Department said that 15% is just the beginning point and they will push for that rate to be higher. Point to be noted that the initial proposal came as the Treasury Office of Tax Policy officials participated in meetings with officials from 24 nations over the last 2-days. It is part of international tax negotiations of the Organization for Economic Cooperation and Development. The officials of the US Treasury Department said the administration was heartened by the reception of its proposal.

It is noteworthy that a comprehensive agreement to set a global minimum tax is one of the provisions in the Biden administration’s Made in America Tax Plan. This plan includes a series of tax provisions (if implemented) that would cover the cost of the president’s more than $2 trillion infrastructure package, which is also known as the AJP or American Jobs Plan. A global minimum tax set at 15% would be lower than what the Biden administration is pushing as a new US corporate tax rate and what it has proposed as the minimum tax on US multinational corporations. The president has called for increasing the corporate tax rate to 28% as part of his tax plan, up from its current 21%.

The officials have argued it would return the rate to historic norms with the increase while keeping it below the 35% rate which was in place before the passage of President Trump’s 2017 tax cuts. The proposal also calls for raising the minimum tax on US multinational corporations from 10.5% to 21% and it would be calculated on a country-by-country basis. Last month, Yellen said that setting a new global minimum tax would ensure that the global economy thrives on a more level playing field and could spur innovation and growth. The Treasury Department also expressed its belief that they need to create an environment where countries work together to maintain their tax bases and ensure the system is equitable. However, Tax Foundation data shows that the average corporate tax rate was just under 24% across 177 different jurisdictions in 2020.