International changes that affect us all have become more frequent. Some touch us directly and others have more remote effects. But the daily news leaves us with the feeling that we are in a time of great change.
In some cases, we do not need the media to inform us about the magnitude and severity of the changes. We live them daily. The coronavirus is one example. Severe, global and, in many ways, unprecedented. Another example is the record number of climate refugees who have had to leave their homes due to devastating wildfires, hurricanes or cyclones. Heat waves with temperatures that in the pre-industrial era occurred every 50 years now occur every 10 years.
But the news that affects us is not only the news that results from climate change or the pandemic. World politics also surprise us. No one expected that a mob of Donald Trump supporters would storm the US Capitol or that the much-heralded departure from Afghanistan would be so ineptly handled by the Joe Biden administration. On the other hand, frictions between the United States and China have become so frequent that it is now normal to hear that a cold war has been unleashed between the two superpowers. Global warming is changing the world, but so is geopolitics.
But in addition to these unmissable and much discussed events and trends there are others, which without being so visible, will have enormous consequences. There are two that are worth noting.
One of these important but little commented news has to do with the demographics of the United States: the current growth rate of its population (0.35% per year) is the lowest in 122 years. This is partly due to the fact that life expectancy in that country has fallen sharply. This decline precedes the impact of the Covid-19 pandemic, the disease that has claimed the most lives in United States history. These increases in mortality mainly affect the poorest and specifically workers, in particular the 52% of the population who do not have a university degree. This inequality has been exacerbated by the effect of covid-19. Since the pandemic broke out in 2019 and through 2020, life expectancy among Hispanics and African Americans in the United States has decreased by three years. Among the white population it fell 1.2 years. These changes in American demographics will have a huge impact on the politics and economy of that country.
One of the areas most directly affected by demographic change will be the fiscal situation: who pays taxes, at what rate, and on what the government will spend the taxes it collects. Tolerance for the high levels of economic inequality that exist in the United States has been significantly reduced and Joe Biden aims to reduce economic gaps. To do this, it will use the state’s ability to collect taxes and use public spending to catalyze social change. An example of this is his decision to increase the minimum amount of taxes paid by large multinational companies. In addition, it decided not to do so unilaterally, but to create a broad coalition of countries that would act in coordination in this field.
The objective of making this an international initiative is to prevent companies from moving their operations to the place where they pay the least taxes. The proposal of Biden and his Secretary of the Treasury, Janet Yellen, is to impose a global minimum tax of 15% on all companies with revenues greater than 890 million dollars.
According to the Organization for Economic Cooperation and Development (OECD), large multinationals have been able to avoid taxes for amounts ranging from 100 to 240 million dollars each year; that is, from 4% to 10% of the total taxes of these companies. The tax rate paid by the largest multinationals fell by half, from 49% to 24%, between 1985 and 2018. In 2017, which is the last period for which there is reliable data, multinationals placed 40% of their earnings, approximately $ 700 billion, in tax havens where they pay little or no taxes.
With this agreement, the United States managed to get 132 countries to commit to charge the global minimum rate. The countries that participate in the agreement represent more than 90% of the global economy, which means that the possibility that companies had to avoid taxes by moving their profits to countries with less taxes will be more limited.
It is not obvious that this agreement will survive as approved. Presumably, companies will use their enormous financial resources and political influence to bring the final deal more in line with their interests. But, in any case, this is a good example that international cooperation is possible.
And that’s a change worth celebrating.
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