It is always nice to look at a newspaper and encounter a piece of news that brings a smile to your face. Not many things one reads in the newspaper are capable of doing that, so when it happens it produces a very good feeling.
I mention this because recently an agreement was reached to block corporations from moving assets to avoid taxes. It is a deal that has been discussed for years and now has particular relevance because the revenues realized from this agreement will help President Biden pay for various programs that are important to him, such as his proposals for child care and climate change.
Jim Tankersley and Alan Rappeport, columnists for The Wall Street Journal, comment on this new agreement: “The agreement would impose maximum 15 percent corporate tax rate in nearly every country in the world and punish the few holdouts who refuse to go along. The Organization for Economic Cooperation and Development estimates the accord will raise $150 billion per year globally from tax fleeing companies.”
Another agreement just recently announced by the Biden administration is also very significant. It will cut U.S. tariffs on European steel and aluminum. This agreement will directly affect costs of basic goods brought into the United States, such as cars and washing machines. In addition and perhaps most importantly, it will put an end to tariffs imposed by the European Union in response to American tariffs imposed on a various European goods. Moreover, the agreement eliminates new E.U. tariffs on American goods, which were scheduled to go into effect on Dec. 1.
It is not often that countries act to modify trade barriers. When they do, it has positive economic and political effects; costs are lowered, production efficiencies are strengthened and political relationships inevitably made stronger. Should this agreement eventually become law in the almost 140 countries that are signatories to it, there is a good chance that these new tax rules will create new revenues as a result of the elimination of many tax havens. Many hours were spent by individual nations seeking to find the best tax rates for themselves.
A very good example of this is the continual effort by U.S. Treasury Secretary Janice Yellin to convince the finance minister of Ireland that he should support this new tax agreement and raise Ireland’s 12.5 percent corporate tax rate. The finance minister finally agreed.
While this agreement is highly significant, it still must be acted upon by 2023, a reflection of the importance placed upon it by those who have signed on to the agreement. Yellin’s unbounded enthusiasm for this new tax agreement reflects how important it is to have. The major industrial countries working together to advance tax policies will inspire economic cooperation among the major industrialized nations. Global agreements that support this goal will allow the major producing countries of the world to cooperate rather than compete with each other. The result should be more economic cooperation, better political relationships, and policies that are mutually economically supportive.
Author and educator Dave Kaplan writes from his home in Santa Barbara, Calif.