Stopping the Race to the Bottom on Taxes
Bloomberg Businessweek|April 19, 2021
The U.S. is energizing a global effort to put a floor under corporate tax rates
Peter Coy

When I interviewed Kimberly Clausing in 2017, she was an economics professor at Reed College in Portland, Ore., with intriguing but seemingly unachievable ideas for how to make multinational corporations pay taxes. I wrote that her plan was worth studying “if only to see how much better things could be if politics didn’t get in the way.”

Well, look at her now. In January, just five days after starting a new job at UCLA School of Law, she was offered the position of deputy assistant Treasury secretary for tax analysis. She took a leave from UCLA a month later to make the move to Washington. Her boss, Treasury Secretary Janet Yellen, and her boss’s boss, President Joe Biden, have embraced international cooperation in fighting tax avoidance. And the long-shot agenda that Clausing and a circle of academics and activists campaigned for is suddenly looking doable. “There is a strong international consensus around addressing these problems, and our action can encourage action abroad,” she said in February in testimony to the Senate Finance Committee.

After decades of undermining one another, 139 rich and poor nations are closing in on a framework for taxing multinational corporations that would be the biggest change in the system since 1923. The goal is to create a united front to prevent corporations from playing one country off against another, recognizing that a race to the bottom in taxation has no winner, only a bunch of revenue-deprived losers.

Multinationals are worried. On April 12 the Business Roundtable, which is the voice of large U.S. corporations, released a member survey showing 76% of chief executive officers believe that one key plank of the Biden plan—doubling the rate on profits earned abroad—would do “moderately” to “very” significant harm to their competitiveness. “The proposed tax increases on job creators would slow America’s recovery and hurt workers,” Business Roundtable President and CEO Joshua Bolten, who was President George W. Bush’s chief of staff, said in a statement.

Taxation of multinationals is a brain-taxing subject, filled with reform jargon like Pillar One, BEPS, GloBE, and Gilti and minimization tactics such as “patent boxes” and “the double Irish with a Dutch sandwich.” The complexity is the outcome of a cat-and-mouse game in which regulators close loopholes and corporate tax lawyers quickly discover new ones.

The underlying problem is simple, though. Individual nations operating on their own, no matter how big and powerful, can’t easily corral corporations that operate across borders and can shift operations—or even just reported profits—to tax havens such as Bermuda and the Cayman Islands. The Organization for Economic Cooperation and Development estimates that this shell game deprives government coffers of as much as $240 billion a year. So joining forces is essential.

The Biden administration’s enthusiasm for squeezing more tax revenue out of multinationals has given fresh impetus to a yearslong project of the Paris-based OECD and the Group of 20, which includes many of the rich countries in the OECD, along with others such as Brazil, China, India, and Indonesia. Almost 100 smaller nations have been invited to participate, making it a truly global effort.

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM BLOOMBERG BUSINESSWEEKView All

PANDEMIC VACATION

The RV business is booming and shows no sign of slowing down. To find out why, our correspondent dragged his reluctant family to the RV capital of the world— the cutest city in north central Indiana!—and hit the road

10+ mins read
Bloomberg Businessweek
May 10, 2021

The Fortnite Fallout

Apple and Epic meet in court, making the collapse of a once-close relationship complete

3 mins read
Bloomberg Businessweek
May 10, 2021

Yes, Streaming Ads Are on Repeat

Commercials on services like Hulu, Pluto, and Discovery+ have become an $11 billion business

4 mins read
Bloomberg Businessweek
May 10, 2021

Facebook Won't Apologize for Instagram Youth

It’s making a kid-focused version of its photo-sharing app, regardless of what critics say

3 mins read
Bloomberg Businessweek
May 10, 2021

Laggard Doesn't (Always) Mean Loser

At least a few companies still in the vaccine race will likely succeed as Covid lingers

4 mins read
Bloomberg Businessweek
May 10, 2021

Why Don't More Women Run Money?

The gender imbalance in portfolio management persists even as some women take top fund jobs

4 mins read
Bloomberg Businessweek
May 10, 2021

COME AT ME

When a gossip rag went after Jeff Bezos, he retaliated with the brutal, brilliant efficiency he used to build his business empire. From the new book Amazon Unbound , an untold story of money, sex, and power

10+ mins read
Bloomberg Businessweek
May 10, 2021

More Merchants Are Courting Cash

Surcharges for credit card purchases become common as businesses try to avoid swipe fees

4 mins read
Bloomberg Businessweek
May 10, 2021

Covid Means There's Even Less Joy in Mudville

Capacity constraints and distancing rules bring big headaches for season ticket holders

4 mins read
Bloomberg Businessweek
May 10, 2021

Bad Trip

Justin Zhu was fired for taking LSD before an important meeting. The whole situation was even weirder

8 mins read
Bloomberg Businessweek
May 10, 2021
RELATED STORIES

DEBATE HEATS UP OVER HOW COUNTRIES TAX BIG TECH COMPANIES

An international debate over how countries tax big U.S. technology companies such as Google, Amazon and Facebook is heating up, presenting a challenge for President Joe Biden’s new administration.

4 mins read
Techlife News
Techlife News #483

Global Watchdog Proposes Tax Overhaul For Big Tech

A global economic watchdog this week proposed an overhaul of international tax rules to make sure big tech companies pay their dues and warned that failure to adopt it would make the economic recovery from COVID-19 harder.

2 mins read
AppleMagazine
October 16, 2020

REPORT FINDS GLOBAL ECONOMIC OUTLOOK NOT AS BAD AS EXPECTED

The global economy is not doing as bad as previously expected, especially in the United States and China, but has still suffered an unprecedented drop due to the coronavirus pandemic, an international watchdog said this week.

1 min read
AppleMagazine
AppleMagazine #464

Looking Ahead

What is the future of IT certification?

8 mins read
Certification Magazine
January 2020

Zuckerberg Accepts That Facebook May Have To Pay More Tax

Facebook CEO Mark Zuckerberg plans to throw his support behind international reforms that would require Silicon Valley tech giants to pay more tax in Europe.

1 min read
AppleMagazine
February 21, 2020

How to Save the Middle Class

Today’s vision of the good life is rooted in twentieth-century ideals. It’s time to reinvent it

10+ mins read
The Walrus
January/February 2021

Dairy: A New Era of Innovation

Although most countries produce milk products, the structure of the dairy industry differs across the globe. Many major dairy-producing countries consume most of their output internally, while others (for example New Zealand) export a large percentage of their production. Local consumption is often in the form of liquid milk, while the bulk of international trade is in processed dairy products such as milk powder.

6 mins read
Food Marketing & Technology - India
November 2020

The Role of Green Budgeting Some Global Approaches

Making a country’s budget green is about integrating it into every aspect of our economy and ensuring there is no wasteful use of natural resources. In this article, Arvind Kumar says that budget should navigate a country’s economy on a path to move to the low-carbon, climate-resilient development path. He succinctly gives examples of some global approaches.

7 mins read
TerraGreen
November 2020

Economic and Environmental Impacts of Coronavirus Pandemic

The COVID-19 pandemic has very badly affected the global economy. It is a general view that global economy has nothing as such to do with the ecology or the environment. However, it is a hard fact that the Sustainable Development Goals (SDGs) and our fight against climate change has a direct link with the economy or economic condition of a nation. In fact, economy cannot be viewed independently, in total isolation of SDGs and our efforts towards mitigation of climate change. Therefore, discussion on the effects of COVID-19 on global economy and world environment will indeed be instructive and rewarding.

4 mins read
TerraGreen
October 2020

PRODUCTIVITY: Best of both worlds?

A new school of thought suggests that workers can increase their productivity by working four days a week. But is it truly feasible?

5 mins read
Indian Management
September 2020