100+ Countries Ready to Sign the 15% Global Corporate Minimum Tax
The economic advisor of the US, Brian Deese, claimed that the United States is working hard to involve more countries to sign the agreement, and 130 countries have already supported the idea of a minimum tax of at least 15%. This agreement will raise the money needed for investment in clean energy plans.
What Is the 15% Global Corporate Minimum Tax?
In this deal, the countries can tax companies up to 15% of their total foreign earnings if they go untaxed through headquarters in other countries. The deal will prevent the incentive use of accounting schemes companies take to shift their profit to the country with low tax rates where they do little business. The 15% global corporate minimum tax is going to change the way multinationals carry out business.
Will the Deal of 15% Global Corporate Minimum Tax Work Out?
The technical details of the deal are precise; although it will take time, the agreement is expected to take effect by 2023. 130 countries out of 139 agreed to the terms and policies of the taxing for an international company on a platform conducted by the Organization for Economic Cooperation and Development.
The deal is an initiative to address the problem in the globalized digital economy. Many companies have been earning enormous profits online, even in countries where they do not have any headquarters and do not pay any tax. The companies even relocate their profit and get tax benefits that can be prevented from the deal.
Which Countries Are Resisting the Deal?
The countries that refuse to accept the deal are Estonia, Ireland, and Hungary, attracting investment even with low tax rates. Ireland said that they would not agree to a minimum 15% tax rate.
According to Finance Minister Paschal Donohoe, 12.5% tax should be imposed as it is a fair rate. At the same time, Ireland wants to constructively engage in the discussion. Barin Deede reacted to this, saying that the deal is a long process and we had to work hard to reach the goal.
The finance minister of Germany, Olaf Scholz, is optimistic about the deal. He said that the agreement’s implementation should be done as soon as possible, even if some countries are not ready to sign up for the contract. He also said that he is looking forward to collaborating with a group of major 20 countries with the group of seven, i.e., G7, to endorse the plan at the officials meeting in Venice.
OECD said that the issues would be resolved by October, and the deal will be implemented till 2023. However, Kristalina Georgieva, head of the International Monetary Fund, urged the countries resisting the agreement to cooperate as the value is for their good interest.
According to the finance minister of France, it is the most crucial international tax agreement and will benefit all the countries in the world.
Which Countries Are Supporting the Deal, and What Is Their Take on It?
France has already started imposing a digital tax on some US-based companies like Google, Amazon, and Facebook. Former US President Donald Trump did not welcome the tax, and he responded by retaliatory tariffs. However, France loves the deal proposed under the leadership of Biden as it will provide a significant push to a global agreement.US Treasury Secretary Janet Yellen believes that it is a historic agreement and the online giants and tech companies earn a hidden profit. They should also pay tax; just because they do not have their physical presence in the country does not mean they can be spared.
Some countries believe that the USA started the self-defeating competition of the international tax.
The USA lowered the corporate tax, and other counties were also forced to reduce the tax to sustain in the market, resulting in a lack of money for building the essential infrastructure. As enough money was not available, the countries did not have enough funds to fight the deadly pandemic.
According to the former Treasury Department and a tax principal at professional services firm KPMG Manal Corwin, the technical complexity of the deal needs to be sorted out. She also said that it was a way out for the USA to get the commitment from various countries to withdraw their digital taxes.
What Experts Say About the 15% Global Corporate Minimum Tax?
According to some experts, the deal can work if the countries having many MNC headquarters make it clear to the companies that they cannot avoid tax by moving their profit to low tax rate countries because the payoff will be taxed at the home country itself.
The companies with no physical presence need to sign multilateral conventions. The minimum corporate tax can be adopted by each company involved in the deal voluntarily.
After many years of intense competition, the 15% Global Corporate Minimum Tax is one historic package that is coming live. This historic package will make sure that the large companies will pay their share of tax. However, an important thing to note is that this package does not eliminate any tax competition.
At the same time, it also accommodates the multiple interests across these negotiable tables, including developing jurisdictions and small economies. Participations in this negotiation have now set a timeline ambition for all the conclusions of these negotiations to happen. This also includes a deadline of October 2021 to finalise the remaining technical work on these two pillar approaches.
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