As economic woes deepen across the globe from breaks in the supply chain, rising inflation rates and debt defaults, the one thing leaders from around the world seem to agree on is that there should be a global minimum tax rate for all wealthy companies to pay their fair share back to the people and governments that they serve.
Looking at the state of the world today, many would agree with the idea and share the belief that something like this could actually be a great thing. The gap between the rich and the poor has never been greater than it is now, so if we can collectively decide to do what we can to help bring that divide together, I say that it is a good thing. Even still, I have questions on how the matter will come together.
My first question would be how will the money that is collected from this tax be used? Looking at governments today and how they handle themselves with the tax dollars they collect from our pockets as we work, this seems to be the most important question to ask of the idea. Many would agree with the thought that our tax dollars here in the United States are often misused and misplaced, being used to pay for things that regular working folks do not want. The potential for the same to happen with these global tax dollars certainly exists, but it doesn’t have to be the case. Are these tax dollars going to be used to further empower governments over their people? Or can these tax dollars actually be used to lift up the people who work at the bottom of the wealth spectrum? If the tax money is used to lift up the poor into a greater sense of well being and to close the wealth gap, then I believe this has the power to be a great thing. If this tax money is used to further empower governments rather than the people that they serve, I’m not so sure that this will be a good thing. I suppose it really just depends on who has the control over what happens to the tax money collected. On that note, the people should be able to vote or choose for themselves where this tax money will be directed, and I believe that same system of thought could be used in our local governments world wide. Let the people choose what happens with the taxes that they pay for, but that is just my opinion.
The second question I would have is how is this extra tax burden going to affect innovation from some of our most productive and powerful companies? With all of this talk about the future of technology between the powers of the United States and China, how will this extra tax burden change the flexibility of companies to spend money on creating new and better things for ourselves and our allies? Will Chinese companies also be dedicated to paying for this tax?
Regardless of these questions, it seems like countries are coming to agreement that this tax is a necessity and are moving forward with plans of doing so. As of this week, 136 countries have signed on to the agreement, with the most recent countries to jump on board including Ireland, Hungary and Estonia. They joined as the agreement adjusted to say that they would not be raising the tax rate from 15%, and that the companies being taxed would be at a high enough bracket to where it wouldn’t affect any smaller or more local companies. Also, any large company that makes profits within a specific country are set to have to pay the tax, no matter where their physical headquarters exist.
The deal still needs for each country to pass its own domestic legislation to be included in the future tax, so the potential this has for being enacted across the world still has a long way to go. The expectation is that this global minimum tax will begin to take effect in 2023. It is expected that the United States will not move forward in implementing such a tax until around 2025. So even with all the talk of agreement for the moment, you can see that even with the rough estimates this idea has a long way to go before it becomes any sort of reality.