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Opinion The 15 percent global minimum tax is a welcome development, but there’s more work to do

Treasury Secretary Janet Yellen speaks during a news conference in London on June 5. (Pool/Reuters)

LEADERS OF the Group of Seven leading industrial nations convene in Cornwall, England, Friday, with their respective finance ministers having already made a significant agreement to change the way countries tax corporate profits. The United States, Britain, France, Germany, Italy, Japan and Canada converged on a minimum tax rate of 15 percent for multinational corporations, which, they maintain, will end the “race to the bottom” that has forced countries to slash corporate rates lest companies flee to low-rate tax havens such as Ireland or Bermuda.

The Biden administration secured the deal with a concession that enables European countries to tax some profits that a handful of large multinationals, including U.S.-based tech companies, earn on sales within their markets; this reversed a position the Trump administration had taken based on “America First” ideology and enforced with retaliatory tariffs. The new U.S. stance reflects not only a welcome return to multilateral coordination but also a sensible assessment that a level playing field in global corporate taxation would promote efficiency and equity. Especially in the wake of the pandemic, the world needs more resources to support public services and less shuffling of income among shell companies.

Republicans in Congress may have the power to undo some or all of the new plan to the extent it requires changes to U.S. law or to international tax treaties, the latter of which are subject to two-thirds votes in the evenly divided Senate. GOP senators have voiced objections, as they do to many proposals that clash with anti-tax ideology. There is some weight to one of the critics’ points: A global minimum tax is more easily declared than enacted, and more easily enacted than enforced. The G-7 agreement’s practical impact won’t be known until the 139 countries involved in global negotiations actually comply. Consent from China, Russia and India, among other large economies, is still pending. Ireland — deeply committed to an economic model built on a 12.5 percent corporate rate — is reluctant to go along. But the G-7 deal would allow the home countries of multinationals to thwart holdouts by collecting the difference between a haven’s tax rate and the global minimum.

To be sure, no one should assume that a global 15 percent minimum would trigger an immediate flood of new revenue from corporate taxation. Analysts at the University of California at Berkeley and the University of Copenhagen have estimated that multinationals shifted $700 billion worth of profits to tax havens in 2017. Taxing all $700 billion at 15 percent would yield $105 billion — which in turn would be spread out among various nations.

Still, the benefits would accrue over time and could be considerable: deterring tax avoidance, preventing further erosion of tax bases around the world and providing governments with more predictable revenue streams extracted more progressively. Though neither particularly revolutionary nor particularly easy to accomplish, a 15 percent global minimum tax would increase the legitimacy, actual and perceived, of corporate taxation. It is therefore a worthwhile goal, on which President Biden and Treasury Secretary Janet Yellen have rightly staked American prestige and spent American political capital. They may have to spend a lot more of both before it becomes a reality.

Read more:

The Post’s View: Biden’s tax plan could bring the world closer to a level playing field for capital

Paul Waldman: Biden’s new tax plan makes the dividing line clear

Jennifer Rubin: The terms of the debate on tax policy have been reset

Jennifer Rubin: Why the G-7 agreement is such a big deal

Ruth Marcus: Attorney General Garland, please stop digging