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The US is one step ahead of the rest of the world. At the beginning of this year, a minimum tax for companies of 15 percent came into effect in the largest economy. With this, the US government wants to put a stop to the tax optimization of large companies and contribute to greater fairness.

However, what is causing concern in the business world is that this new US minimum tax is only roughly comparable to the model of the Organization for Economic Co-operation and Development (OECD), which Switzerland will vote on June 18.

Only 78 companies affected by the new tax?

The details in a nutshell: The new U.S. minimum tax will affect companies that have generated average annual profits of at least CHF 911.3 million over the past three years and have so far paid less than 15 percent to the national tax authority IRS ( Internal Revenue Service) delivered their pre-tax profits. (In the OECD model, this threshold is 750 million euros, or about 730 million Swiss francs.)

For companies headquartered abroad – in Switzerland, for example – there is another rule: they are subject to the US minimum tax only if the US subsidiaries have earned at least $100 million (about 91 million Swiss francs) in net profit.

Because the US tax code gives creative accountants a lot of leeway, it is difficult to predict the specific effects of the new minimum tax. A study by the University of North Carolina at Chapel Hill last September found that only 78 publicly traded US companies should take into account a tax increase in the US. The additional revenue would flow entirely into the federal treasury.

What about Swiss companies?

Foreign companies operating in the largest economy were not included by the authors of the Chapel Hill study. However, a look at a list of the 2,000 largest companies in the world shows that only 21 Swiss companies achieved profits of more than 911.3 million Swiss francs (or 1 billion US dollars) last year.

This illustrious group includes the usual candidates such as Nestlé, Novartis, Roche and the Zurich Insurance Group. However, the respective annual reports do not show how much money these companies have made in the US to date and how much they are taxed.

The answer to the question of how to reconcile the two tax systems so that US companies are not treated differently in the US and in Europe is also difficult. Because this would contradict the very purpose of the OECD initiative to finally treat legal persons equally in the main industrialized countries.

The OECD refers to the implementing provisions for Pillar 2 of their model, which also shows that US companies can offset at least part of their foreign tax burden against their domestic tax burden.

However, according to observers, this is only an interim solution for the years 2024 and 2025. The US parliament will discuss the OECD rules in two years at the latest.

The timing was not chosen by chance: important pillars of the tax reform implemented in 2017 under President Donald Trump will expire at the end of 2025; if the House of Representatives and the Senate do not react, the old, higher tax rates will automatically come into force again. A fundamental debate on tax issues, including corporate tax, was therefore necessary.

Republicans oppose OECD model

However, the Republicans, who will have a majority in the House of Representatives until at least early 2025, are sceptical. For example, Jason Smith, a leading financial politician, wants nothing to do with adopting the OECD ideas.

The Republican representative has already announced “countermeasures” to protect US companies from foreign tax officials. He is supported by multinationals whose accountants are desperately trying to navigate the undergrowth of new national and international regulations.

The Democrats, on the other hand, who are currently leading the Senate, seem directionless. The demand that big companies like Amazon.com be paid is actually popular with voters. In the Senate, however, more energetic action against tax-optimizing companies does not seem to be able to achieve a majority.

At the start of President Joe Biden’s term, the attempt to incorporate OECD reform into national law failed. Members of central parliament fear being labeled anti-business if they support the tax plans of an organization headquartered in France. (aargauerzeitung.ch)