Biden, G-7 Leaders Call for 15 Percent Global Corporate Tax

President Joe Biden made his first big overseas trip recently when he joined other world leaders and allies for the G7 Summit. As you may already know, the G7 is a group of nations that consist of Canada, France, Germany, Italy, Japan, the United Kingdom and, of course, the United States. There were many headlines that were produced from the recent G7 Summit, but one of the more curious ones is the fact that President Biden and other leaders stated they would all endorse a minimum corporate tax rate of 15 percent.

If you found this a bit odd, you’re certainly not alone. In this post, we thought it would be a good idea to dig into what exactly this means and what ramifications it could have on global business should it take effect. Here’s a closer look:

What Does a 15 Percent Global Corporate Tax Rate Mean?

Essentially, it’s just a minimum corporate tax rate that’s designed to promote a more globalized economy — supposedly to benefit working-class citizens. Supporters of the policy say it will level the playing field and prevent certain countries from cutting their tax rate in an effort to sway corporations to relocate or open up offices in their regions. Ireland and the British Isles are two countries that have attempted to woo corporations via low tax rates, even when their customers and key executives were located elsewhere. Just think of this as a way to make sure that no corporations — or nations — are bending the rules.

Will a 15 Percent Global Corporate Tax Pass?

We’re not sure yet. And for now at least, the 15 percent agreement is looking more symbolic than anything. The thinking is that it will become a nice springboard for trying to receive broader acceptance with the G-20 when it convenes in Italy next month. The Organization of Economic Cooperation and Development, a group of 37 countries, is another obstacle that this measure will have to overcome down the road. Then, if it reaches more of a universal global consensus, there’s a better chance that this will become reality. However, it’s also worth noting that any agreement would be a non-binding measure, so countries could choose whether or not to enact such a policy. But if enough agree to it, the pressure of not doing it will become too great to ignore.

The biggest question is whether or not this measure will garner enough support. Opponents to the 15 percent corporate tax rate say that it could hurt the United States’ competitiveness. And as we noted above, Ireland currently has a low corporate tax rate that it appears unwilling to increase to the 15 percent minimum. Stay tuned on this one as more develops.