Tribune. On June 5, 2021, the G7 finance ministers solemnly affirmed that they supported the efforts undertaken under the aegis of the OECD to distribute the tax bases more equitably between the States and also declared themselves in favor of the introduction of a minimum tax rate for multinational companies, which they propose to set at 15%.
The statement follows the release by the U.S. Treasury on April 7 of a 19-page report that further explains President Joe Biden’s “Made in America” tax plan, which complements the “Build Back America” infrastructure proposal. Over $ 2 trillion presented the week before. The tax plan would raise about $ 2.5 trillion over fifteen years, which the administration said would fully offset the cost of its infrastructure proposals.
In addition to increasing the federal tax rate, which would go from 21% to 28% (President Biden subsequently indicated that the rate could eventually be set at 25%, which is the French corporate tax rate in 2022), the measure that attracts particular attention is the following: companies headquartered in the United States should justify that the profits made in their subsidiaries abroad have been, country by country, subject to a minimum tax rate of 21%.
Otherwise, they would have to pay an additional tax in the United States, the rate of which would correspond to the difference between the rate actually applied in the foreign country and this 21%. As a reminder, in the current system, the minimum tax rate, understood globally and not country by country, is set at 10.5%.
The end of tax havens?
To gauge the magnitude of this change, just take two examples.
– An American company owns a subsidiary taxed in Ireland at the rate of 12.5%. Today it does not pay any tax in the United States on its Irish results. Tomorrow, it could be required to pay an additional tax at the rate of 8.5% (21 – 12.5) on the profits made by its subsidiary in Ireland.
– An American company has several subsidiaries abroad, some of which are not subject to tax while others are subject to a tax rate of 28%. Under the current regime, if the average rate estimated at world level reaches 10.5%, no tax is due in the United States. As a result of the reform, the results achieved in states where no tax or a very low tax is levied will be subject to a rate of 21% or close to it.
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