“I pay less taxes than my secretary,” said the American billionaire investor, and great philanthropist, Warren Buffet when describing the injustice of the US tax system.
Tuesday’s appeal by United States Treasury Secretary Janet Yellen on the need to adopt an international minimum corporate tax rate on multinational firms may change this scandalous tax regime. The initiative by Yellen – along with President Joe Biden’s decision to increase taxation on domestic American businesses – is mostly driven by the need to increase tax revenue in the United States.
Those revenues are necessary to fund President Biden’s “American Rescue Plan,” the 1.9-trillion-dollar package seen resulting in an economic rebound from the pandemic-fueled recession, as well as the 2.5-trillion-dollar package to upgrade the infrastructure of the United States.
If this proposal is implemented – with some already talking of an international deal being struck in June – there will finally be an international model of fairer taxation of multinational corporations which, as is widely known, avoid taxation by using international tax havens. That’s because in some countries citizens can face a taxation rate that can even reach as high as 60% of their income. Businesses can also face a tax rate of up to 30% of their profits.
Multinational corporations on the other hand have their own god. Through murky international practices of corporate taxation, they manage to face a tax rate smaller than 1% of their profits – under 100 dollars taxed per million dollars of profit! This shameful tax regime breeds huge iniquities, often at the expense of citizens, which also creates unfair competition between businesses.
This is why this was also pursued by the European Union Commission. Specifically, by Danish Commissioner for Competition Margrethe Vestager – now executive vice president of the Commission – who took on the multinational corporations. She even attempted to force Apple to contribute taxes worth 13 billion dollars to the Irish state. The ruling was overturned at the European Court, but there is more yet to come.
In the United States, Biden seems determined to rock the boat, steering bravely toward social justice, in a fashion reminiscent of Franklin D. Roosevelt and John F. Kennedy. In Europe we continue – toeing the German line – to ruminate on the 750 billion euros of the recovery fund and debate fears of inflation while society around us is crumbling.