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EXPERT COMMENT

The proposed global minimum rate could release large economic gains and help reduce popular distrust against multinational companies.

Joe Biden is proving to be both bold in his fiscal ambitions and brave in his choice of battles. This is especially true of the latest effort by the US president and Treasury Secretary, Janet Yellen, to wade into the labyrinth of corporate taxation. Obscure regulations have long shaped the financial structure of international companies which exploit legitimate loopholes to save on tax. There are therefore substantial benefits to reform – not least helping to fund Joe Biden’s multitrillion dollar spending plans. But reform, of course, will require overcoming systemic inertia and entrenched political opposition. The campaign will also test Biden’s ability to mobilize coalitions to drive change.

Biden's plan

The plan responds to three different factors. First is the post-pandemic need to raise revenue. Increasing the headline rate of US corporate profit tax to 28 per cent from 21 per cent would raise an estimated $2 trillion of additional revenue over 15 years. Although not earmarked, this would help pay for new public infrastructure that the US needs and would also show financial markets there are plans to control the rise in public debt.

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