World Bank warns against high global tax minimum

Photo: AP David Malpass

The president of the World Bank David Malpass has warned politicians and global leaders against setting a global minimum tax rate for companies that is too high, BBC reported. Malpass said he did not want to see new rules and amendments that would prevent poor countries from attracting investment with low charges. Low taxes, which attract fresh investments is a popular tool for emerging economies.

The comment comes after US announced it was mulling a global tax reform aimed at preventing extremely low taxation. The 21% global minimum rate earmarked by US Treasury Secretary Janet Yellen "strikes me as high", Malpass added.

Some officials noted they still hoped to reach a global tax deal by mid-year. Yellen has said a global minimum tax on companies is necessary to stop a "30-year race to the bottom", which has seen countries slash rates on companies, in an effort to lure business investments. She is in favour of having all countries agree to a minimum tax rate of 21%. Meanwhile, the US President Joe Biden is seeking to increase its minimum tax rate to 28%. To US lawmakers, Yellen has made the case that establishing a global minimum tax would allow the US to remain competitive, despite that increase. The UK is also looking to raise taxes on corporations from 19%, up to 25% in 2023, in what would be the first increase since the 1970s. Earlier talks led by the Organisation for Economic Co-operation and Development had focused on a minimum corporate rate of 12.5%. While the European Commission this week said it supported the idea of a minimum tax, officials declined to comment on a specific rate.

Some countries, such as Ireland, have expressed reservations about the US proposal.

The average corporate tax rate globally is about 24%, according to the Tax Foundation. Europe has the lowest regional rate at roughly 20%.

Malpass told the BBC he was encouraged by signs of renewed focus on the global tax talks, which have dragged on for years without coming to resolution. But he cautioned that world leaders must consider how a new global minimum tax might fit in with other proposals to tax carbon and digital services provided by tech giants.

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