"Big multinational companies will from Monday be subject to a global minimum tax for the first time, as landmark cross-border tax reforms go live, seeking to raise up to $220bn in extra annual revenue.
Almost three years after 140 countries struck a deal to close glaring loopholes in the international system, some major economies will from January start to apply an effective tax rate of at least 15 per cent on corporate profits.
Under a series of interlocking rules, if profit by a multinational is taxed below this rate in one country, other countries will be able to charge a top-up levy. The OECD, which drove the reforms, estimates it will increase annual tax revenue by as much as 9 per cent, or $220bn worldwide.
Jason Ward, principal analyst at the Centre for International Corporate Tax Accountability and Research pressure group, praised the “super smart design” of the reform. “It will reduce incentives from companies to use tax havens and incentives for countries to be tax havens,” he said, adding that it puts “a serious brake on what was a race to the bottom”.
The first wave of jurisdictions implementing the global minimum tax from January include the EU, UK, Norway, Australia, South Korea, Japan and Canada. The rules will apply to multinational companies with an annual turnover of more than €750mn.
Several countries long seen as havens by multinationals will take part, including Ireland, Luxembourg, the Netherlands, Switzerland and Barbados, which previously had a corporate tax rate of 5.5 per cent.
Neither the US nor China have introduced legislation to do so yet despite backing the deal in 2021. But the global reforms are designed to still have a significant impact."
FT.com
Almost three years after 140 countries struck a deal to close glaring loopholes in the international system, some major economies will from January start to apply an effective tax rate of at least 15 per cent on corporate profits.
Under a series of interlocking rules, if profit by a multinational is taxed below this rate in one country, other countries will be able to charge a top-up levy. The OECD, which drove the reforms, estimates it will increase annual tax revenue by as much as 9 per cent, or $220bn worldwide.
Jason Ward, principal analyst at the Centre for International Corporate Tax Accountability and Research pressure group, praised the “super smart design” of the reform. “It will reduce incentives from companies to use tax havens and incentives for countries to be tax havens,” he said, adding that it puts “a serious brake on what was a race to the bottom”.
The first wave of jurisdictions implementing the global minimum tax from January include the EU, UK, Norway, Australia, South Korea, Japan and Canada. The rules will apply to multinational companies with an annual turnover of more than €750mn.
Several countries long seen as havens by multinationals will take part, including Ireland, Luxembourg, the Netherlands, Switzerland and Barbados, which previously had a corporate tax rate of 5.5 per cent.
Neither the US nor China have introduced legislation to do so yet despite backing the deal in 2021. But the global reforms are designed to still have a significant impact."
FT.com
