- Global corporation tax. The Biden administration has released plans for a global minimum corporation tax with its “Made in America Tax Plan”. The two pillars of the plan are (a) provisions for allowing countries to tax multinationals based on a company’s sales in that country, and not registered profits (as these can be shifted to lower tax jurisdictions) and (b) an effective global minimum corporation tax, whereby multinationals paying lower than this minimum in a particular country would face a “top up” tax in their home country, reducing the incentive and ability to shift profits to a tax haven. (See Guardian explainer)
- ~~Rationale. Over the past thirty years, there has been a race to the bottom in corporation tax rates around the world, undermining countries’ ability to raise revenue, and profit-shifting to tax havens has increased (60% of multinationals’ foreign earnings are now channeled through tax havens, compared to 30% in 2000).
- ~~Context. The proposal builds on long-running OECD talks on global corporate tax reform, and may break the recent deadlock in these talks. The US government also hopes its proposals limit the incentive for countries to unilaterally impose taxes on US-based tech companies (e.g. a ‘digital services tax’). The New York Times’ Jesse Drucker outlined the history of advocacy leading to these developments on Twitter.
- ~~Benefits to the UK. Tax Justice UK estimates that the American proposals would translate to a £13.5 billion increase in annual tax revenue for the British government.
- Policy analysis. Tax expert Richard Murphy argues in the Financial Times that Biden’s plans are "unexpectedly robust" but would require a comprehensive system of country-by-country profit and tax reporting to work, and criticises the plans for only applying to the largest 100 multinational companies.
- ~~Fairness for low-income countries. Last month, Chief Executive of the Tax Justice Network Alex Cobham wrote on the history of the OECD talks to date and profiled an alternative proposal for global corporate taxation. In particular, he argues reforms should not grant superior rights to the “home country” of multinationals - which the second pillar of Biden’s plan does - as this disadvantages lower-income countries (World Economic Forum).
- ~~Not just about tax rates. The Tax Foundation’s Daniel Bunn emphasised the need for a minimum tax base in addition to a minimum tax rate (Twitter).
- $2 trillion infrastructure plan: climate, care and unions. The Biden administration has followed up its radical American Rescue Plan (see our analysis here) with an ‘American Jobs Plan’ which, if passed, “would be the most far-reaching climate bill ever enacted” (Economist). Further, the President has allocated $400bn to investment in health and care systems, marking a shift towards treating spending on social infrastructure as investment, as has been called for by the Women’s Budget Group. The plan also includes a “sweeping” pro-union bill.
- ~~Analysis. For more details, see Ella Nilsen’s excellent summary for Vox, while clean energy writer David Roberts examines the climate-related elements of the proposal in detail.
- ~~COP26. Biden is expected to announce the US’s ‘Nationally Determined Contribution’ - its emissions reductions target ahead of the UN climate negotiations in Glasgow this year - and try to build international ambition at a climate summit on 22-23 April.
- Paradigm shift. The scale and radicalism of Biden’s proposals since entering office have strengthened the argument that a paradigm shift is underway in American, and global, economic policy making. Economist Noah Smith (Noahpinion) argues Biden’s policy reforms are comparable to the New Deal or Reaganomics in scale, and offers an analysis of the “unifying philosophy” of Bidenomics.
- ~~Biden the radical? Noting the break between Biden’s radicalism as president and his previous political career as a moderate, the New York Times’ Ezra Klein examines the reasons for such a shift, including the revival of the American left.
- ~~ICYMI, last month Economist J. W. Mason outlined 10 reasons why Biden’s American Rescue Plan bill represents a decisive break with neoliberal views on macroeconomics.