What does the creation of a global minimum corporate tax rate mean for countries and companies? Here’s an explainer 👇
Such a deal aims to end what U.S. Treasury Secretary Janet Yellen has called a "30-year race to the bottom on corporate tax rates" as countries compete to lure multinationals.Major economies are aiming to discourage multinationals from shifting profits - and tax revenues - to low-tax countries regardless of where their sales are made.
The OECD and G20 countries aim to reach consensus on both by mid-year, but the talks on a global corporate minimum are technically simpler and less contentious. If a broad consensus is reached, it will be extremely hard for any low-tax country to try and block an agreement. The OECD said last month that governments broadly agreed on the basic design of the minimum tax but not the rate. Tax experts say that is the thorniest issue, although the G7 accord creates strong momentum around the 15%-plus level.
Much still needs to be ironed out - including the metrics that will determine how and to which multinational companies the tax will be applied.
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