Why the Global Minimum Tax Deal is a victory for Silicon Valley
America’s Silicon Valley tech giants are heading for a tax victory, as 130 countries signaled support for a global minimum tax rate that would lead to the most important international tax reform in a century. At least 90% of global GDP is represented in this agreement, including all major G20 economies like Germany, France, China, India and Japan.
Notably, low-tax countries such as Ireland, which is a popular destination for the European headquarters of many American tech companies, including
from Google (GOOGL),
(FB) —Estonia and Hungary, as well as Sri Lanka, Nigeria and Kenya, were absent from the agreement.
Governments of 130 countries Thursday agreed on the main lines for the plan, which would target a minimum tax rate of at least 15% for companies operating in that country.
The new corporate tax rate has several implications, such as working to solve the problem of tax evasion that costs nations between $ 100 billion and $ 240 billion in tax revenue each year, according to the Organization for Economic Co-operation and Development. (OECD).
A key tax evasion tactic occurs when international companies seek headquarters in countries with the lowest tax rates, in what US Treasury Secretary Janet Yellen called a “global race to the bottom.” .
President Joe Biden, who has pushed the corporate tax increases, believes the deal will help boost revenues for infrastructure spending. “And that will allow us to direct the extra income we raise into generational investments, which are necessary to maintain America’s competitive advantage in today’s global economy,” he said.
Silicon Valley has long been embroiled in feuds with the European Union over tax matters, as the bloc has sought to curb what it sees as unfair advantages and overbreadth by US tech giants as the global economy becomes increasingly digital, according to Bloomberg.
This new tax deal represents a major victory for the tech industry as it circumvents the threat of national country-by-country taxes that would target US tech companies.
“It is now widely recognized that the tax rules that were designed for a world of bricks and mortar just don’t quite match an increasingly online world,” said Nick Clegg, vice president of global affairs. at Facebook, at a press conference last month. , reported the Wall Street Journal.
Microsoft rose 2.2% on Friday, Apple 2%, Facebook 0.1% and Intel 1.3%. The tech-rich Nasdaq Composite rose 0.8%.