Massive shocks to tech giants from global corporate tax overhauls- October 2021
Support from 136 countries has ensued a vast overhaul of corporate taxation, introducing a higher global minimum rate that replaces the digital taxes implemented by the US. The recent deal includes a 15% minimum tax rate for corporations with additional clauses delineating 25% of profits to be taxed over a 10% margin for the top 100 or so largest multinational companies.
The OCED has mentioned that a minimum tax rate would raise government taxation revenue by $US150bn a year with the new deal reallocating $US125bn of profits to be taxed in tax haven countries. Treasury Secretary Janet Yellen claims the deal is a step closer in ending the global ‘race to the bottom’ among countries enticing companies with lenient tax rates.
Parties include nations in the G20, EU and the OCED have agreed to global negotiations that faltered during Trump’s presidency, undermined by the spiraling trade tensions of unilateral measures and retaliatory tariffs. Instead, this final deal would offer the solace of new revenues from reallocated profits for governments facing huge debt burdens from the pandemic. However, of the countries involved, Kenya, Nigera, Pakistan and Sri Lanka have yet to sign the deal where such developing countries would gain almost nothing in extra direct revenue.
As mentioned by France’s Finance Minister Bruno Le Maire, “This agreement at the OECD is clearly a tax revolution which will lead to less unfairness, to more justice, to more efficiency in the way we will tax digital giants and the way we will put in place a minimum taxation.”