Nine nations are rejecting the Biden White House’s “global minimum tax.”
During the G7 last month, Biden and other leaders revealed a “strong global minimum tax” of at least 15%. The White House alleged that this policy was “a crucial step towards stopping the long race to the bottom that forces nations to compete with one another for who can give the lowest tax rate to companies at the expense of employees, and instead focus on investing in growing the middle class.”
However, smaller countries — which compete with larger countries by minimizing their regulations and taxes — are starting to reject the idea.
Only 130 of the 139 nations within the Organization for Economic Cooperation and Development signed the agreement. Estonia, Barbados, Ireland, Hungary, Kenya, Sri Lanka, Nigeria, Peru, St. Vincent, and the Grenadines have refused to accept the tax.
Resistance from Hungary, Estonia and Ireland pose a big threat to the deal, since the European Union requires unanimous consent for the adoption of the new Biden tax.
“Ireland showed our broad support for the agreement on Pillar Two but showed our reservation concerning the global minimum tax of ‘at least 15%.’ Because of this reservation, Ireland is not joining the consensus,” said the Minister of Finance for Ireland, Paschal Donohoe, a country that has a 12.5% corporate rate.
Finance ministers for Estonia and Hungary — which have rates 14% to 20% and 9%, respectively — gave similar comments.
When the global tax agreement was unveiled, Donohoe stated that “smaller nations… need to be able to use tax policy as a way to compensate for the advantages in industry and resources that is possessed by more developed nations.”
As Donohoe said, developing nations do not possess the same levels of human capital and infrastructure as advanced economies.
For the past fifty years, many small nations have lowered taxes to come out of poverty. The United Arab Emirates — which only has taxes of around 0.1% of their total domestic income — witnessed its economy multiply thirty-six times over since the 70’s. Also, South Korea helped its people’s entrepreneurial spirit through increasing educational opportunities and a good legal system over the decades.
Author: Steven Sinclaire