The Global Corporate Tax Debate
By Zachary Elias | December 2, 2021
If you've been following the news lately, you might have come across the concept of a “global corporate tax rate.” What does this mean exactly? Well, in America, we have something called a corporate tax that taxes the income earned by corporations. Being the good ole’ USA, we have some of the world’s highest corporate tax rates; hence why companies like Google are legally headquartered in places like Ireland. So why would the US, at the G20 summit in Rome this past October, endorse a global corporate tax rate?
Let’s first discuss the drawbacks of a global corporate tax. By setting a floor for nations that endorse this rate, you are inherently making them uncompetitive against nations that do not adhere to the tax rate. It is likely that companies will simply headquarter in nations that do not adhere to the rate, giving them the revenue that those taxes incur. Thus, having a global corporate tax makes little sense. It simply makes the nations adhering to it uncompetitive.
This brings us back to our question. Why would the US want this? Well, in theory, it’s a fairly noble idea. Janet Yellen, our treasury secretary, wants nations to stop the “race to the bottom” of global corporate tax rates. However, what Secretary Yellen fails to understand is that global control over economies seldom works. Instead of focusing on what the rest of the world is doing, the good secretary should focus on what her own nation is doing. Instead of worrying that other countries’ corporate taxes are too low, she should perhaps adjust our corporate tax rates to be more competitive. It is a known economic fact that lowering taxes leads to less evasion and thus more revenue. So if we lower our corporate tax rates, then perhaps the government could even benefit, and the citizenry (those who come first in our republic, at least theoretically) would really benefit. Business investment would increase, and likely wages and thus consumption along with it.
So G20 leaders, cut the posturing and get your own houses in order before you propose grand ideas at champagne flowing summits.
Edited by Joseph Barbieri