President Biden and other world leaders at the G20 summit in Rome approved a global minimum tax on corporations, a move US officials hope will help strengthen the president’s Build Back Better agenda.
The G20 finance ministers in July had previously agreed on a minimum tax rate of 15%. The measure required formal approval at the summit of the world economic power centers on Saturday in Rome.
In a statement, Finance Minister Janet Yellen claimed that the agreement reached by the leaders on international tax rules, with a minimum global tax, “will end the damaging race to the bottom of corporate taxation.”
WORLD LEADERS REACH THE LANDMARKET GLOBAL TAX AGREEMENT, WHICH SETS 15% MINIMUM
Biden, who had originally called for a 21% minimum tax, celebrated the move in a tweet, writing that leaders “clarified their support for a strong global minimum tax.”
“Here at the G20, leaders representing 80% of the world’s GDP – both allies and competitors – have prepared their support for a strong global minimum tax,” Biden’s tweet reads. “This is more than just a tax treaty – it is diplomacy that is transforming our global economy and delivering to our people.”
The agreement aims to deter multinationals from storing profits in countries where they pay little or no tax. These days, multinational companies can make huge profits from trademarks and intellectual property. They can then allocate earnings to a subsidiary in a tax haven country.
In the United States, an update to the tax code will require legislative approval by Congress – a feat that still faces an uphill battle, as the United States is home to 28% of the world’s 2,000 largest multinationals. The House and Senate will have to pass a bill that raises the minimum tax on corporate overseas profits to 15% from the current rate of 10.5%.
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Democrats plan to include the increase as part of their party-line tax bill, which is likely to be passed using a procedural tool known as reconciliation, allowing the party to bypass a 60-vote filibuster by Senate Republicans.
“Joe Biden’s efforts to get G20 leaders to create a cartel to keep corporate taxes high will be as popular with taxpayers in America as the OPEC countries’ similar success in setting a high price for oil was for US car owners,” Grover Norquist. President of Americans for Tax Reform, told Fox News.
Fox Business’ Megan Henney and the Associated Press contributed to this article.