by Dr. JACK RASMUS
The corporate media in recent days has been busy resurrecting and re-reporting the deal negotiated weeks ago by Janet Yellen, US Treasury Secretary, to get 100+ other nations to sign on to and introduce a 15% global corporate alternative tax in their countries.
But why is the mainstream media bringing it up again now? Is it to soften the blow of Biden’s repeal of his proposal to hike corporate taxes in the US from Trump’s 21% to 26%? (It was 35% pre-Trump)? Or is there something else as well that explains why the media is running the global tax story that’s already weeks old?
The global sign on to Biden’s 15% global minimum tax, announced weeks ago, is purportedly designed to prevent big multinational corporations’ manipulating governments by seeking out, and getting, special tax deals in certain countries at the expense of others.
A notorious example is Ireland, where US and other multinational corps locate their headquarters and book their global tax payments at Ireland’s lower corporate tax rate which is, on average, only 2%-3%, for most corporations.
Ireland is also the favorite locale for what’s called the ‘Inversion’ tax loophole. Per the loophole, US multinationals sell products or services in large quantities in other countries, but book their profits in Ireland simply because they locate their company headquarters there. They make nothing in Ireland, in many cases, but get to pay the Ireland much lower corporate tax rate instead of much higher tax rates in countries where the corporation actually does make and sell goods and services.
The biggest US corporate beneficiaries of this Inversion loophole have been US pharmaceuticals, tech companies, finance companies, corporate consulting companies, and many others. Under Clinton US corporations got to activate the loophole by simply ‘checking a box’ on the US corporate tax forms.
But Ireland is not the only back door out of domestic corporate taxes. There’s a host of others. Luxembourg and Netherlands in Europe also come to mind. There are others outside Europe as well.
The inversion tax loophole has enabled US corporations in particular to play one country against another and choose the lowest in which to relocate headquarters and book global profits at lowest rates.
World Financial Review for more