Tax experts have warned that the Biden government’s plan for a minimum global corporate tax rate could backfire in the United States and the West as the rise of consumers in India and China shifts sales to Asia.
The United States has proposed minimum taxes based on domestic sales, but the president has warned that curbing the influence of the West will mean that revenue will be concentrated in growing Asia’s giants within decades.
“Over time, as Indians, Chinese and the middle class get richer and their consumption increases, the effect of the policy will be a shift towards tax revenues collected in China and India,” said Marvin Rust, head of European taxation at Alvarez & Marsal. . .
“You can see that the Chinese and the Indians won’t want the other way around because their people are going to become more prosperous … From the perspective of the Western world, this requires very little attention.”
The White House is seeking support for his plan, which will seek equal tax opportunities and suppress evasion.
Several European leaders have also backed proposals to impose global minimum taxes on the largest companies after trying to crack down on tech giants in the United States in recent years.
“The anxiety is fully justified,” said Matt Kilkoyen, deputy director of the Adam Smith Institute, as he asserts that Yellen is trying to support a rapidly fading world. Emerging, non-Western countries will not automatically accept US hegemony. ”
“The demand for tax harmonization threatens to push our old friends and the countries that we currently face in the arms of each other with the weakness of the West,” he added.
Economists forecast tectonic shifts in the global economy in the coming decades as developing countries grow stronger and richer. The economies of China and India are expected to follow the United States in terms of volume, with Indonesia, Brazil, Mexico and Nigeria rising in the ranking.
The United States wants a corporate tax increase to help pay for the increase in spending, as Joe Biden wants to boost investment in infrastructure. However, it can be difficult to obtain support from countries that benefit from low corporate taxes.
Bank of America estimates that in 2019, 60 percent of US multinationals’ revenues were booked in just seven tax havens, including Ireland, Switzerland and the Netherlands. This has risen sharply from 30 percent in 2000.