The tax plan outlined by US President Joe Biden last week will affect pharmaceutical companies and the technology sector in particular. According to tax experts, it will also be quite challenging for the United States to minimize tax evasion through back doors.
Among other things, the Biden government wants to increase tax revenues from overseas activities. With the extra income, part of the extensive support package for the infrastructure of more than 2000 billion dollars must be paid. For example, Biden advocates a minimum tax of 21 percent on foreign profits and a minimum tax of 15 percent on profits reported in financial statements.
The additional tax burden limits companies in releasing credits for research and development departments. Paying employees in shares can also be affected by this.
Many of the most valuable pharmaceutical and technology companies’ most valuable assets are intellectual property, such as patents and algorithms. These intangible assets make it easier for companies to organize their global activities so that tax costs are kept to a minimum. Industries such as retail or agriculture have many physical assets that cannot be easily transferred to countries with lower taxes.
Biden’s predecessor Donald Trump already revised the tax system in 2017. As a result, American companies were already paying more taxes in the US. Before that, companies could indefinitely delay paying taxes on foreign profits, as long as they didn’t return that money to the US.
If Biden’s plan goes into effect, it should minimize tax avoidance potential around the world. US Treasury Secretary Janet Yellen said earlier that the government favours a global minimum tax that will end a “race to the bottom”. However, negotiations on such an agreement have been going on for years.