The first day of the G-7 Finance Ministers’ Meeting on June 4, 2021 at the Lancaster Palace in London will be attended by British President Rishi Sunak (center) and US Treasury Secretary Janet Yellen (right).
Stefam Rousseau | AFP | Getty Images
The finance ministers of the group of seven (G-7) advanced countries agreed on Saturday Minimum global corporate tax rate at least 15%.
U.S. Treasury Secretary Janet Yellen He said such a global minimum rate would end “below corporate taxation” and “ensure justice for the middle class and working people in the United States and around the world.”
A common practice among many multinational corporations is to declare income – from intangible sources such as software and patents – within lower tax jurisdictions regardless of where the sale is made. This allows companies to avoid paying higher taxes in their home countries.
The G-7 agreement feeds a broader global effort to update tax rules around the world, and will be discussed further at next month’s G20 summit.
The Organization for Economic Co-operation and Development (OECD), an intergovernmental group, has been facilitating negotiations on global taxation for the past few years. Companies are expected to pay in additional taxes ranging from the global corporate minimum tax rate of $ 50 billion to $ 80 billion, Reuters report.
In general, countries in Africa and South America charge higher corporate tax rates than many in Europe and Asia, according to the Washington – based Think Tank Tax Foundation, OECD and Consulting KPMG.
Data show that many lower tax jurisdictions are smaller countries such as Bulgaria and Liechtenstein.
Data shows that about 15 countries do not impose a public enterprise income tax. This includes island nations such as Bermuda, the Cayman Islands and the British Virgin Islands, widely known as maritime “tax havens” – the jurisdiction of large corporations to convert profits in order to pay lower taxes.
Those territories benefit from jobs created to serve multinational corporations such as legal and accounting services. Tax companies also make money from fees paid by large companies to create subsidiaries there.
Daniel Bunn, vice president of tax trust’s global programs, said lower tax jurisdictions help invest in other countries with higher taxes.
Therefore, the use of a global minimum tax rate would increase the cost of those investments, and this would “cause a slight recession,” he told CNBC.Squawk Box Asia“On Monday.
Bunn said there are many questions about how that minimum tax rate will be used and which portions of corporate income will be taxed. He added that tax shelters may not be able to leave at all.
“It’s not clear where things will be resolved in a few years,” he said. “There may still be opportunities for evasion or avoidance, or for different countries to change the rules in a way that prioritizes their jurisdiction.”