Multilateralism was supposed to be the great theme of the Biden presidency. No longer would the US plow its lonely furrow. Instead it would engage with the rest of the world on matters of mutual interest.
Where, though, does that fit with the attempt by treasury secretary Janet Yellen today to try to set a minimum level of corporate income tax for the whole world to whole world to observe?
The US is no longer withdrawing from international agreements, as it did in Trump’s day — it is doing something far more objectionable, by trying to lay down American rules for the rest of the world to follow. It is a blatant case of Biden’s administration wanting to jack up corporate taxes (from 21 percent to 28 percent) to fuel US government spending — and expecting the rest of the world to cooperate, in order to prevent tax revenues draining away from US shores. Biden’s approach risks making ‘America First’ look positively magnanimous.
Yellen, in a speech to the Chicago Council on Global Affairs, did say she would ‘work with’ other G20 countries to set a minimum level of tax. But it isn’t really going to be a debate on equal terms — it is going to be a case of the US expecting to get its way.
Moreover, many of the countries that Yellen will try to target are much too small to qualify for G20 membership — they are the world’s small republics, which have used low corporate tax rates to attract investment.
Ironically, given how Biden, like many a Democratic president, has wooed the Irish vote, one of the biggest victims could be Ireland. For years, the country (population four million) has prospered partly as a result of levying one of the lowest corporation tax rates in Europe and the world — just 12.5 percent. It has grown wealthy — the fourth richest in the world, in terms of GDP per capita, according to the IMF and the World Bank. Yet it now seems as if it is going to be expected to jack up corporate tax rates — raising revenue it doesn’t even need — just to make life easier for the US Treasury.
Yellen didn’t say how she might try to enforce a minimum corporate tax rate. Will there be sanctions, or surcharges on corporations which have based themselves in countries with low corporate tax rates? Either way, it is not going to look good if the US throws its weight around trying to bully economically successful states with a free-market ethos — while still trading with obnoxious regimes like Iran and China. We don’t want a ‘race to the bottom’, Yellen said in trying to justify her idea. That rather depends on how you define ‘the bottom’. For a rich and powerful country to try to impose its fiscal policy on the rest of the world is not exactly the moral high ground.