What does the global minimum corporate tax rate advocated by the US, the IMF and the G20 mean?

11 April, 2021

Hellen Yellen advocating for the global minimum corporate tax rate
Hellen Yellen advocating for the global minimum corporate tax rate

The global minimum corporate tax rate on corporate profits, defended by the US, the IMF and under discussion at the G20, in addition to responding to the internal needs of US capital to stay ahead in the competition with China and to be instrumental in the formation of a new Western bloc, points to an internal reorganization of each national bourgeoisie after 12 years of crisis of accumulation

In this article

Biden’s New Deal is not just another bailout plan

Biden's New Green Deal and the global minimum rate go hand in hand.
Biden’s New Green Deal and the global minimum corporate tax rate go hand in hand.

When US President Joseph Biden announced a gigantic $2 trillion investment and infrastructure plan a week ago, the argument that resonated with most of the world’s press was its linking to competition against China. It was a timely observation. That the world’s leading power is reinforcing interventionism, increasing state-led capital concentration and betting on renovating all essential infrastructure is relevant: it is the first step towards a war capitalism.

Not only is it not just another bailout plan. In fact it goes far beyond both the Green Deal and domestic policy. It involves a proposed revision and reorganization of the goals of state capitalism and lays the economic groundwork for the consolidation of a U.S. bloc.

In case there were any doubts about the former, this week Biden unveiled his tax plan. The goal: to raise $2.5 trillion, almost eight times the total amount of the EU Next Generation funds, by making U.S. multinationals pay taxes not only on profits generated at home but on those generated in the rest of the world. Not only will they pay for more. They will also pay more: from the current 21% to 28%.

But making it viable does not just depend on passing a law, or even relying on better tools than those they have today in order to control big business. They need to raise the cost of alternatives. In other words, they need to make it more difficult for other national capitals to compete for attracting capital by charging capitals less taxes. And that means a global minimum corporate tax rate above the 12.5% discussed – unsuccessfully- by the OECD. Also that countries that had bet on being an offshore platform for US capital, such as Ireland in the EU, will suddenly find themselves deprived of what until now was their best argument in the global competition for capital.

The global minimum corporate tax rate lays the economic groundwork for the formation of a US bloc

The global minimum rate has unsettled the EU rulers.
The global minimum rate has unsettled the EU rulers.

The first signs that the US was going to build its imperialist policy around the global minimum corporate tax rate came from the IMF when it took the lead. But it has finally become evident when US Treasury Secretary Hellen Yelen put forward a global minimum corporate tax rate above 12.5% as a target for the G20… and a further 120 countries that are expected to be made to sign up to a commitment that embodies this target.

Germany and especially France, which is engaged in its own battle to tax US tech giants which routinely turn to Ireland as a form of tax avoidance, were quick to applaud. But for the EU the move has a further twist: after decades of the EU trying to homogenize Irish tax policy without success is Biden going to get Ireland to give up its growth model in just a few weeks to make the global minimum corporate tax rate its own? The US couldn’t find a better way to ridicule Paris and Brussels’ talk of Europe’s strategic autonomy

But the reality is that adaptation to a model with taxation similar to that of the continent was central to the program of Sinn Féin, the party with the most votes in the last election and the supporter of a more aggressive policy vis-à-vis Britain to secure the annexation of Ulster. That means that the all-party-except-Sinn-Féin coalition now governing has two options: reject tax reform by pushing the U.S. to support a Sinn Féin with too many anchors in the Democratic party or accept it and win support for its own annexationist strategy.

In the Irish press most openly linked to the governing parties and national capital one can read feature articles today with such clear messages as It’s time we took the training wheels off ultra-low taxes, because the economic bicycle isn’t going to topple.

Beyond the U.S. and the imperialist game, a global reorganization of the bourgeoisie

The global minimum rate definitively shuts down Thatcher and Reagan-era ideology
The global minimum rate definitively shuts down Thatcher and Reagan-era ideology

Beyond responding to the internal needs of US capital to stay ahead of the competition with China and instrumental to the formation of a new Western bloc, the implementation of a global minimum corporate tax rate points to a reorganization at the internal level of each national bourgeoisie after 12 years of crisis of accumulation as a reaction to its aggravation and the realization that they still do not know how many more crises are still to come.

We are not moving from state capitalism to something else, but rather a strengthening of the (economically) interventionist role of the state within it and a reorganization of the distribution of income among the different sectors of the bourgeoisie.

From the late 1980s until Trump’s triumph, the so-called neoliberalism had led to a reorientation of anti-crisis policies that gave flight to international competition for capital, reduced tariff barriers for goods and tried to reduce the general costs of exploitation of labor (health, labor conditions, education, etc.) mutualized by capital in the state. Thus, among all the factions of the ruling class the corporate bourgeoisie, especially the financial bourgeoisie, came to the fore and saw its income rise.

Today this new New Deal no longer has its sights set on offshoring production but on organizing a gigantic transfer of income from labor to capital around the Green Deal which in turn will reinforce a new international division of labor.

Internal to each bourgeoisie, the global minimum corporate tax rate causes the corporate bourgeoisie to have its wings clipped in the name of fighting inequality. It is a cynical discourse: reducing the personal income of the corporate bourgeoisie and large individual shareholders may reduce inequality rates, but not the pauperization of workers, which will be aggravated precisely by what is pursued as an overall goal: extracting more income from labor and reviving the profitability of capital as a whole. They are not doing it to tackle inequality. What they are about is to reinforce the state’s capacity for economic action. And under this there are two tendencies that today go hand in hand:

1 The crisis and the need to maintain at all costs the profitability of the large capital applications of each national capital. Something they effectively cannot leave at this point of crisis in the hands of those markets deified until now and more rigged than a universal church miracle.

2 The trend toward a war economy in which even the basic supplies of industry are called into question by political twists and imperialist frictions (the same force beneath the emergence of a new international division of labor).

What comes next

Macron at the Elysée. France has hailed the global minimum rate but the issue has more edges seen from Europe's ruling classes.
Macron at the Elysée. France has hailed the global minimum corporate tax rate but the issue has more sides to it as seen from Europe’s ruling classes.

Rebalancing acts between imperialist interests, even within the same bloc, just as between factions of the same ruling class, are never peaceful or smooth.

The repercussions are almost endless. We have pointed out how all this already affects the imperialist frictions between Ireland and Great Britain, also in the perspectives of the EU. In the U.S. domestic arena it can create a show, although among the European and South American bourgeoisies the immediate effect will be almost unnoticeable. Draghi, Lagarde, Calviño or Ribera are there to attest that the bureaucracy -the bourgeois layer most closely linked to the state- in Europe was not exactly in the background.

Of course, the official ideology and cultural discourse will change, and we will see it in mass culture before long. But for the time being even the bureaucracy is very likely to take some disciplinary bites at the expense of the leadership of the political apparatus. There we have Macron closing the ENA, the National School of Administration that has historically served as the alma mater of the state’s top bureaucracy.

It is a decision of the highest political value because the National School of Administration manufactures high officials, the elite who put themselves at the service of the nation. Many ministers talk about it behind the scenes, the head of state makes decisions and keeps complaining about not seeing them implemented. This is the famous deep state. The reform of the ENA, therefore, also amounts to pointing the finger of blame for all the failures of recent months, the causes of our setbacks up to the health crisis are, therefore, those responsible for the top administration.

RTL today