Joe Biden gets a win on global taxes at his first G20 as President
Joe Biden gets a win on global taxes at his first G20 as President
President Joe Biden's first day at the Group of 20 Summit began Saturday with the President achieving one of his core objectives for the global conference -- an endorsement of a 15% global minimum tax from world leaders.
The tax is a chief priority of Biden's that the White House believes would end the global race-to-the-bottom on corporate tax rates. The new rule will be formalized when the leaders release a final G20 communiqué on Sunday, when the summit ends.
Joe Biden gets a win on global taxes at his first G20 as President
"The President emphasized the importance of this historic deal during his intervention," the official said, referring to Biden's turn to speak during the meeting. "The President also mentioned that while we don't see eye to eye on every issue, we can tackle shared interests."
Each individual nation must pass its own version of the tax, and it may take some time to implement worldwide. One hundred thirty-six nations agreed to such a tax in October, and Saturday's endorsement from 20 of the world's largest economies is seen as a step toward worldwide implementation.
The measure would tax large multinational companies at a minimum rate of 15% and require them to pay taxes in the countries where they do business. The Biden administration breathed new life into the global initiative earlier this year and secured the support of the G7 countries in June, paving the way for a preliminary deal in July.
Aspects of Biden's recently unveiled spending framework would enact part of the global minimum tax scheme, though the fate of that measure remains uncertain as Democrats haggle over timing. Biden administration officials have downplayed the effect that Democratic infighting has on Biden's ability to rally foreign leaders.
"These world leaders really are sophisticated. They understand. There's a complicated process in any democracy to do anything as ambitious as we're pursuing in our domestic agenda," the senior administration official said. "These are multigenerational investments and, of course, we're trying to reform the tax code to pay for it. And so, you know, I think there's going to be a broad understanding that takes time."
Divisions within Biden's own political party are threatening to derail his entire economic agenda back home, and Biden himself has acknowledged the credibility of the United States and the future of his presidency are on the line. Despite urging lawmakers to give him a legislative win to tout on the world stage -- especially the climate change measures that would give his presence at next week's United Nations Climate Summit extra weight -- Biden has shown up in the Eternal City without a done deal. Added to that complication are the questions coming from some nations about Biden's commitment to working cooperatively on global issues in the wake of the US' chaotic withdrawal from Afghanistan.
The President arrived at the summit site Saturday morning, stepping from his car and greeting Draghi. Biden posed for a family photo with the G20 leaders, along with Italian medical workers who joined the heads of state on the platform.
Biden spoke during the meeting and "reminded G20 Leaders that new pandemics can arise any time so it is important that we strengthen systems and do more to create the global health security infrastructure to make sure we are prepared against the next pandemic," the official said.
The official said Biden also "underscored his commitment to ending the global pandemic and securing an inclusive global economic recovery, including by supporting developing countries through debt relief."
A separate senior administration official said on Friday Biden would stop short of getting directly involved in OPEC decisions about ramping up supply: "We're certainly not going to get involved with the specifics of what happens within the cartel, but we have a voice and we intend to use it on an issue that's affecting the global economy."
Energy policy was top of mind for the President in a meeting with German Chancellor Angela Merkel and Vice-Chancellor Olaf Scholz, Merkel's likely successor. Per a senior administration official, Biden "made the point that we need to see adequate supply of energy in this moment as we make the long term transition to a carbon free economy" during the sideline meeting.
G20 leaders to endorse Biden proposal for global minimum corporate tax
The agreement, drawn from proposals drawn up by the Organisation for Economic Co-operation and Development (OECD), is designed to safeguard tax revenues and offer stability to businesses that operate across national borders.
“The fact that we agreed on this new international tax system is good news for all of us, it’s clearly a revolution in the international tax system,” said the French finance minister, Bruno Le Maire, on Friday as officials arrived in Rome.
The Biden administration had sought a 21% corporate tax rate floor but a 15% rate still represents a win for the US heading into next week’s COP26 climate conference in Glasgow. Biden’s domestic plans to cut carbon emissions are mired in Washington gridlock.
It sets a minimum rate of 15% on the profits of large businesses, which will raise additional revenue for most governments and shift the tax burden to where companies sell to consumers, not where they are based. International corporations will have less scope to deploy tax avoidance schemes.
Some nations are expected to benefit more than others. According to Wall Street Journal, for the US additional revenues from a minimum corporate tax will be 15 times those of China. A separate report cited by the Journal estimates that the total boost to 52 developing countries could be about $1.5bn to $2bn a year, far less than wealthier nations.
A deal, Biden said, would “eliminate incentives to shift jobs and profits abroad, and ensure that multinational corporations pay their fair share here at home. This international agreement is proof that the rest of the world agrees that corporations can and should do more to ensure that we build back better.”
Pascal Saint-Amans, a senior tax official at the OECD, told the Journal the “pushback against globalisation that we’ve seen everywhere should also have been a pushback against tax multilateralism. But if you want to protect your sovereignty, what you need is tax cooperation.”
The proposals will still need to be ratified by participating countries. In the US, given the route treaties must take, that could require two-thirds approval in a Senate split 50-50 and rarely home to bipartisan cooperation.
Joe Biden faces a more skeptical global audience at his first G20 as President
President Joe Biden will face a more skeptical global audience than his first day in Rome when he attends the Group of 20 Summit, which begins Saturday in the Italian capital after a day of presidential glad-handing with world leaders.
Divisions within Biden’s own political party are threatening to derail his entire economic agenda back home, and Biden himself has acknowledged the credibility of the United States and the future of his presidency are on the line. Despite urging lawmakers to give him a legislative win to tout on the world stage — especially the climate change measures that would give his presence at next week’s United Nations Climate Summit extra weight — Biden has shown up in the Eternal City without a done deal. Added to that complication is the questions coming from some nations about Biden’s commitment to working cooperatively on global issues in the wake of the US’ chaotic withdrawal from Afghanistan.
This weekend marks the first in-person G20 Summit since the beginning of the coronavirus pandemic, and world leaders are expected to discuss the Covid-19 pandemic, global supply chain problems, a global minimum tax rate, high energy prices and combating the climate crisis, among other topics. The President will raise energy supply issues and throw his backing behind a global minimum tax in the first session of the G20 on Saturday in Rome, a senior administration official says. Those two issues are among the top agenda items for Biden at the conference of the world’s largest economies.
“The overarching theme going into (Saturday) is the United States is steadfastly committed to our allies and partners and to face-to-face diplomacy at the highest levels,” the official said. “And at the G20, the United States and allies and partners are here, we’re energized, we’re united.”
The topic of the first session is the global economy and pandemic, and its main objective will be an endorsement of a global minimum tax, a chief priority of Biden’s that the White House believes would end the global race-to-the-bottom on corporate tax rates.
The agreed-to measure would tax large multinational companies at a minimum rate of 15% and require them to pay taxes in the countries where they do business. The Biden administration breathed new life into the global initiative earlier this year and secured the support of the G7 countries in June, paving the way for a preliminary deal in July.
“In our judgment, this is more than just a tax deal. It’s a reshaping of the rules of the global economy,” the official said.
Aspects of Biden’s recently unveiled spending framework would enact part of the global minimum tax scheme, though the fate of that measure remains uncertain as Democrats haggle over timing. Biden administration officials have downplayed the effect of that Democratic infighting has on Biden’s ability to rally foreign leaders.
“These world leaders really are sophisticated. They understand. There’s a complicated process in any democracy to do anything as ambitious as we’re pursuing in our domestic agenda,” the senior administration official said. “These are multigenerational investments and of course, we’re trying to reform the tax code to pay for it. And so, you know, I think there’s going to be a broad understanding that takes time.”
Biden also plans to “raise the short term imbalance in supply and demand in the global energy markets” during the first G20 session,” the official said: “We’d like to raise the issue and underscore the importance of finding more balance and stability both in both oil markets and and gas markets.”
Still, the official said Biden would stop short of getting directly involved in OPEC decisions about ramping up supply: “We’re certainly not going to get involved with the specifics of what happens within the cartel, but we have a voice and we intend to use it on an issue that’s affecting the global economy.”
“There are major energy producers that have spare capacity,” the official said. “And we’re encouraging them to use it to ensure a stronger, more sustainable recovery across the world.”
Iran is also set to be on the agenda for the US and its top allies.
On Saturday, Biden will meet with UK Prime Minister Boris Johnson, French President Emmanuel Macron and German Chancellor Angela Merkel to discuss the path toward returning to the Joint Comprehensive Plan of Action (JCPOA), which is aimed at reining in Iran’s nuclear program in exchange for relief from sanctions, the White House said. Former President Donald Trump withdrew the US from the JCPOA deal in 2018, and Biden has said the US will rejoin it once Tehran returns to full compliance with the pact’s restrictions on nuclear development again.
The President is expected to hold additional bilateral meetings with world leaders while in Rome, though the White House has yet to make any firm announcements. There will also be a traditional “family photo” of the leaders, which will be one of the most photographed opportunities for them to meet with each other during the summit.
The President’s interactions with world leaders will be closely watched throughout the weekend, particularly as he tries to smooth over a diplomatic dust-up with one of the US’ oldest allies, France.
The US, the United Kingdom and Australia announced a new partnership last month that included providing assistance to help Australia develop nuclear-powered submarines. France says the deal was made in secret without its knowledge and jeopardized an existing contract worth billions to provide Australia with diesel-powered submarines. In a stunning rebuke of the announcement, Macron briefly recalled France’s ambassador to the US.
On Friday in Rome, Biden said his administration was “clumsy” in its handling of the deal that deprived France of billions in defense contracts when he met with French President Emmanuel Macron, who appeared ready to move on from the spat but made it clear that the US will need to prove itself trustworthy going forward.
The meeting was the first time the two leaders saw each other face-to-face since the rift. Biden said he was under the impression France had been informed “long before that the deal was not going through, honest to God.”
In addition to meeting with Macron on the first day of his trip, Biden and the first lady met with Pope Francis at the Vatican.
Biden, who is Catholic, and the Pope met one-on-one for 90 minutes. The President said afterward that Francis told him he was pleased he was a “good Catholic,” and that he should continue receiving communion, despite opposition from some conservative American bishops over his support for abortion.