The FT reports that 140 countries have agreed to have a min tax of 15% for major global companies.
This is good news for governments and the people they represent. The aim of the agreement is to stop a race to the bottom.
This follows concerns that companies, such as Amazon, were legally able to avoid paying tax by moving their headquarters to low-tax countries.
Global minimum tax on multinationals goes live to raise up to $220bn
- A global minimum corporate tax rate of 15% comes into effect today, which was agreed upon by nearly 140 countries as part of a major tax reform by the Organisation for Economic Co-operation and Development (OECD).
- This tax reform aims to ensure that multinational corporations pay a minimum level of tax and do not shift profits to low-tax countries using tax havens. It is expected to raise global tax revenues by up to $150 billion annually.
- The new rules will apply to multinational companies with revenue above €750 million annually and are projected to affect over 1,000 companies worldwide, including large US tech groups like Amazon, Apple and Google.
- Countries can still set their own corporate tax rates above the 15% floor. The UK's rate remains at 25% while the US raised its minimum to 15% as part of the new rules.
- The new tax regime is seen as significant but critics argue the 15% rate is still low and leaves loopholes open for tax avoidance. Some developing nations wanted a higher minimum rate of 21%.
- Implementation challenges remain such as agreeing on how to calculate a multinational's taxable income in different markets. However, the new rules are still considered a breakthrough in international tax cooperation.
Source: Financial Times (https://on.ft.com/41DDEcd)
Author: Martin Cox
New in 2024 - my blog is focussed on updates about the stuff I am reading.