US tax reform will shift to other parts of the world

Joe Biden plans to raise corporate taxes on American soil from 21% to 28% to raise $ 3.3 trillion to fund his infrastructure investment plan. After all, the US president plans to pay at least 21% per country to foreign-based subsidiaries. A real revolution. For example, any American company based on Irish soil – with a 12% tax on profits – would pay 9% more to the U.S. Treasury. To that end, it is still necessary to persuade the US Senate this summer, which is not certain.

But the American shock wave has already raised pro-tax awareness on this side of the Atlantic. Like Thomas Pickett, he called on France on Friday morning in the French Interior to “follow the American model” and condemned a government “completely against the tide of ambition coming from the United States” with the planned fall of the corporate tax. And production tax.

It should soon be forgotten that the CIT rate was not 34.34% in France a long time ago and the US rate is now 21%. As Joe Biden decides to cut the US rate and Emmanuel Macron the French rate, the two will actually come together, 28% for the first and 25% for the second. It is this adjustment of the corporate tax rate in developed economies that marks the real revolution. This trend has been downward for decades in corporate taxation. This race for the lowest bidder has affected everyone, most recently reducing their corporate tax rate from 35% to only 21% in 2017, ”said Pascal Saint-Amans, director of the OECD’s Tax Center.

Sovereignty. But the financial crisis of 2008 and the subsequent health crisis made a difference. States need money. Banking secrecy was the first to bear the brunt of this new struggle against harmful practices. “Countries have realized that by exchanging automated information between tax administrations they regain sovereignty and that this is possible for better tax capital and companies,” says Saint-Ammons.

“The US goal of 21% IS based on Europe’s average tax rate is brilliant. 12.5%, as discussed in the OECD, the rate for the financial game is 21%, that is, we tax everyone. It will make it possible to return more valuable measures to the soil, ”explains Antoine Colona de Istria, partner of Norton Rose Fulbright LLP.

Ways d ‘Referee. Once the work on the OECD is completed, the first victims will be small countries that have accumulated everything on occupation taxation to attract capital. They need to find new competitive advantages such as flexibility or regulation in their law. “It doesn’t change much in terms of competitiveness. Eric Sane, Montaine’s economic adviser, confirms that the move will only affect smaller countries. Large international groups, on the other hand, have to close a lot of tax arbitration lanes. “

France welcomes this wonderful turn of America. “We propose that an order be applied at the European level to implement the minimum tax on corporate tax,” Bruno Le Myre said during a press conference on Thursday. “This order, if ever there was an agreement in the OECD, could be accepted under the French president in the first half of 2022,” the Economic Minister noted, welcoming “a real tax revolution on the table.”

If the G20 heads of state and heads of state can come to an agreement at the Rome summit next October, Antoine Colona de Istria promises that “this will really be a real formal change and there will be no revenue for it.” It is now unclear for the United States to specify their plan. However, in taxation more than anywhere else, the devil is always in the details.