Americans Are Concerned That Global Taxes Will Erode U.S. Tax Sovereignty

Americans Are Concerned That Global Taxes Will Erode U.S. Tax Sovereignty

The world governments are coming together to impose a global corporate income tax. It could have a significant impact on the business world. The TIPP Poll surveys Americans on their support for the move, concerns about job losses, and eroding tax sovereignty.

Raghavan Mayur
Raghavan Mayur

The proposal for a global minimum corporate income tax of 15% recently got backing from 130 countries. The accord comes after four years of intense negotiations amongst world leaders.

Companies and corporations seek to maximize profits; that's their goal. Businesses have long exploited tax havens – offshore countries with low tax rates – often eroding the countries' tax revenues where they are based or operate.

As more businesses shift online and political borders or tax jurisdictions do not restrict digital services, it has become necessary to update the rules. The global tax "would force technology giants like Amazon and Facebook and other big global businesses to pay taxes in countries where their goods or services are sold, even if they have no physical presence there."

Global Tax

There are two prongs or "two pillars" to this tax strategy.

Under one, the largest multinationals will have to pay taxes in countries where they operate or sell their services and goods – not only in the country where they are registered. The second pillar imposes a 15% global minimum corporation tax, thereby doing away with tax-havens.

When this comes into effect in 2023, large multinational corporations will find their powers to evade, reduce, or negotiate tax structures considerably curtailed. Conservative estimates suggest that the new global corporate tax will raise an additional $50 billion-$150 billion in revenues.

The details of the global corporate tax are still being ironed out. Taxing multinational enterprises that conduct various businesses in different countries with differing laws is not a simple task.

Some, like Google and Facebook, are said to have welcomed the move. Probably because they fear a digital service tax would have been steeper.

Others have raised many concerns. Some fear that internet and cloud-based companies will end up paying multiple taxes on the same income. Besides, the new tax structure could affect smaller businesses and start-ups.

Others have questioned how the tax will be implemented and if there will be an international body to oversee its rollout. As yet, there is a lack of clarity on where the two pillars overlap and where they diverge.

Above all, the proposed global corporate tax primarily targets business-to-consumers transactions. It could likely mean that the consumers may end up paying higher prices even on the internet marketplace.

A late June/early July survey conducted by TIPP Poll found that less than half support the proposed global tax. Larry Kudlow, the former Chief of the National Economic Council under President Trump, collaborated with the latest TIPP Poll to gauge Americans' opinion of global taxes.

Larry Kudlow's presentation of the results on his Fox Business television show can be viewed here. Additionally, his column from the New York Sun is available here.

We asked over 1400 Americans, "Do you support or oppose the idea of global taxes on multinational corporations proposed by multilateral organizations such as the G7 and G20?"

  • 46% Support
  • 22% Oppose
  • 33% Not Sure

Americans are aware of large corporations spanning multiple nations depriving the country of its tax dollars. The Trump administration, in 2017, took the initial steps to bring back revenue lost to tax havens with the U.S. corporate offshore minimum tax.

Countries that have so far profited by offering lower tax rates will see their incomes drop. Ireland, Hungary, and Estonia have not yet signed the deal.

Jobs And Taxes

As with other tax hikes, the global corporate tax is bound to affect the economy and jobs, at least in the short term. As we have seen with other proposed tax increases, support for higher taxes wane when confronted with the prospect of job losses. (Read the story here)

Asked by the TIPP Poll, "If you knew that it would result in job losses in the U.S., would you support or oppose a global minimum tax on multinational corporations to be paid to the countries where the sales are made?"

  • 33% Support
  • 47% Oppose
  • 20% Not Sure

The mention of job loss erodes support by 13 points. More crucially, the opposition to the proposed tax more than doubles, rising almost to the halfway mark at 47%.

Tax Sovereignty

The new legislation aims to end tax-havens. But will the move jeopardize tax sovereignty? The idea that a body or organization other than the U.S. government will have the authority to tax American companies that operate beyond its borders does not sit well with many.

To the TIPP Poll question, "Some say that the idea of global taxes through multilateral organizations such as the G7 and the G20 erodes America's tax sovereignty. How much do you agree or disagree with this viewpoint?" The response was:

  • 42% Agree
  • 19% Disagree
  • 38% Not Sure

While the chance to earn tax revenue is welcome, Americans are wary of giving away taxation powers to entities other than the U.S administration.

Though the Biden administration may support a global minimum tax, if considered a treaty, such a move would require two-thirds ratification in Congress.

Republicans in Congress will almost certainly fight tooth and nail to keep the President from winning.

Additionally, at the grassroots level in the United States, the concept of a global tax imposed by a multilateral authority is likely to spark skepticism, particularly among Americans skeptical of international organizations such as the United Nations.

If the issue is framed as America losing its tax sovereignty, it aligns with the immigration debate and has the potential to influence the midterm elections.


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