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Deal Reached On Global Minimum Corporate Tax Rate Of At Least 15%

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--- start quote

(Reuters) -Finance Ministers from the Group of Seven (G7) rich nations reached a landmark accord on Saturday backing the creation of a global minimum corporate tax rate of at least 15%, an agreement that could then form the basis of a worldwide deal.

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.

WHY A GLOBAL MINIMUM TAX?

Major economies are aiming to discourage multinationals from shifting profits - and tax revenues - to low-tax countries regardless of where their sales are made.

Increasingly, income from intangible sources such as drug patents, software and royalties on intellectual property has migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries.

WHERE ARE THE TALKS AT?

The G7 accord feeds into a much broader, existing effort. The Organization for Economic Cooperation and Development has been coordinating tax negotiations among 140 countries for years on rules for taxing cross-border digital services and curbing tax base erosion, including a global corporate minimum tax.

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 minimum is expected to make up the bulk of the $50 billion-$80 billion in extra tax that the OECD estimates firms will end up paying globally under deals on both fronts.

HOW WOULD A GLOBAL MINIMUM WORK?

The global minimum tax rate would apply to overseas profits.

Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could "top-up" their taxes to the minimum rate, eliminating the advantage of shifting profits.

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.

Other items still to be negotiated include whether investment funds and real estate investment trusts should be covered, when to apply the new rate and ensuring it is compatible with U.S. tax reforms aimed at deterring erosion.

WHAT NEXT

A G20 meeting scheduled for Venice next month will see whether the G7 accord gets broad support from the world's biggest developing and developing countries.

Much still needs to be ironed out - including the metrics that will determine how and to which multinational companies the tax will be applied.

The G7 communique left open what will happen in the meantime to digital services taxes on big technology companies in various jurisdictions, which the United States wanted to be scrapped as soon as a deal was in place.

It said only that there should be "appropriate coordination between the application of the new international tax rules and the removal of all Digital Services Taxes".

Any final agreement could have major repercussions for low-tax countries and tax havens.

The Irish economy has boomed with the influx of billions of dollars in investment from multinationals. Dublin, which has resisted European Union attempts to harmonize its tax rules, is unlikely to accept a higher minimum rate without a fight.

However, the battle for low-tax countries is less likely to be about scuppering the overall talks and more about building support for a minimum rate as close as possible to its 12.5% or seeking certain exemptions.

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petal355

New member
"Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could "top-up" their taxes to the minimum rate, eliminating the advantage of shifting profits."

Interesting
Does it mean this is applied only to multinational groups, and not affecting someone here who is based in one country ( tax+residence)
 

Jerry1911

New member
"The meeting, hosted at an ornate 19th-century mansion near Buckingham Palace in central London, was the first time finance ministers have met face-to-face since the start of the pandemic."

All paid for with taxpayers' money. Can't make this shit up smi(&%

Anyway seems like it will still be possible to sit in Dubai with a tax transparent entity and pay no tax. So for most of us here it's a non issue.
 

Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
Interesting
Does it mean this is applied only to multinational groups, and not affecting someone here who is based in one country ( tax+residence)

It will apply to only multinationals...............for now ca#"!.

However if they can so quickly agree on a global minimum corporate tax it will be easy to agree to a global minimum personal income tax. Most nations would not be affected by a global minimum personal income tax of 15% but it would end almost all tax havens such as Dubai and most Caribbean countries as it would become uneconomical to live in such countries and pay tax alongside a high cost of living :confused:.

P.S Global minimum personal income tax is coming ;).
 

Nishizawa

New member
It will apply to only multinationals...............for now ca#"!.

However if they can so quickly agree on a global minimum corporate tax it will be easy to agree to a global minimum personal income tax. Most nations would not be affected by a global minimum personal income tax of 15% but it would end almost all tax havens such as Dubai and most Caribbean countries as it would become uneconomical to live in such countries and pay tax alongside a high cost of living :confused:.

P.S Global minimum personal income tax is coming ;).
If the discussion of Global Minimum Corporate Tax is started, I wonder if the UK and US are in favor of this. Isn't Joe Biden and his family have a close connection with Delaware?
 

Konstanz

Entrepreneur
It will apply to only multinationals...............for now ca#"!.

However if they can so quickly agree on a global minimum corporate tax it will be easy to agree to a global minimum personal income tax. Most nations would not be affected by a global minimum personal income tax of 15% but it would end almost all tax havens such as Dubai and most Caribbean countries as it would become uneconomical to live in such countries and pay tax alongside a high cost of living :confused:.

P.S Global minimum personal income tax is coming ;).
Global minimum personal income tax would be disaster, but I don't believe it would have enough political support any time soon.
You pay tax were you live. It's different tax than corporate income tax.
I don't believe Dubai or Monaco would not agree with that. It would mean collapse of economy
It's now all about paying tax were you do business.
 

JackAlabama

Entrepreneur
Global minimum personal income tax would be disaster, but I don't believe it would have enough political support any time soon.
You pay tax were you live. It's different tax than corporate income tax
I also would underline your point here but I also am inclined to entertain @Martin Everson s arguments.
Maybe as an "agreement" certain countries would start pushing for an us-style citizenship based taxation.
The political argument is rather easy with "but the US also does that..."
Germany, France or Japan could be one of the starters is my uneducated guess.
 

Konstanz

Entrepreneur
I also would underline your point here but I also am inclined to entertain @Martin Everson s arguments.
Maybe as an "agreement" certain countries would start pushing for an us-style citizenship based taxation.
The political argument is rather easy with "but the US also does that..."
Germany, France or Japan could be one of the starters is my uneducated guess.
This could happen, but you could renounce German citizenship and get St Kitts citizenship..
These countries like UAE would have to change their business model or start giving people citizenships, because everybody would leave..
 

BlueMist

Entrepreneur
In Malta the corporate income tax is 35% but 6/7th is being refunded, so effective 5% tax is paid. I see no problem for low or tax free countries to follow this example.
 

Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
Global minimum personal income tax would be disaster, but I don't believe it would have enough political support any time soon.

It's coming sadly. Most countries already meet a 15% minimum income tax over their defined income tax threshold. So it won't be such a big deal.

I don't believe Dubai or Monaco would not agree with that. It would mean collapse of economy

These tiny economies will have no say. No one is gonna miss them if they go bankrupt sadly. UAE got a smaller GDP than Bangladesh. These two are nothing economies like most of Caribbean that no one will miss if they disappeared sadly :confused:.

Maybe as an "agreement" certain countries would start pushing for an us-style citizenship based taxation.
The political argument is rather easy with "but the US also does that..."
Germany, France or Japan could be one of the starters is my uneducated guess.

That will likely come also. I mentioned that elsewhere on here a while ago. I also toyed with the idea that you will not be able to renounce citizenship until you pay off your share of national debt...lol.
 

azb1

Entrepreneur
I think UAE have serious economy. People not only miss but there are serious damage to world economy if UAE collapse.
UAE never sign this type of deal because "Tax Saving" is UAE's bread and Butter. Without tax saving who will live in and pay crazy fees in desert.

Let's assume UAE sign this type of deal people will still figure out way to pay zero tax.
USA has highest tax rate, Still big companies figure out way to save tax .



 

Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
I think UAE have serious economy. People not only miss but there are serious damage to world economy if UAE collapse.

UAE is nothing economy. If it collapsed tomorrow it would mean nothing to world sadly.

Without tax saving who will live in and pay crazy fees in desert.

Yup thats what every developed nation wishes for the dictatorship of UAE sadly.

Let's assume UAE sign this type of deal people will still figure out way to pay zero tax.

Yes but UAE is a very very weak country economically and politically. I remember years back the US breathed on UAE about money laundering and Nigerians. The next morning every Nigerian non-resident had their account closed. If the OECD came and said adopt XYZ the UAE will do so the next morning. Their economy is a joke. I mean how many overpriced Indian made cheaply built apartments can they flog to foreigners with dirty money?
 

22kay

New member
Interesting what happens when everybody is paying the same, corp. income tax and personal income tax, all over the world. There will be a group that will be making good profit managing government in that country (or countries) but there will be the question from the citizen - "what do I get for my tax money?".

Now, these people that are in control of the government will need to prove that their government is the best among all others and that is why a (prosperous) citizen should live there. If you pay the same taxes living in USA but pay top dollares for health care then suddenly the government in any other country that gives better healthcare would be a better option. Whichever government builds the best life quality will have more citizens and more tax money...unless/until this also is put out of control for a citizen...then what? Would some kind of -ism enter worldwide?
 

Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
Now, these people that are in control of the government will need to prove that their government is the best among all others and that is why a (prosperous) citizen should live there. If you pay the same taxes living in USA but pay top dollares for health care then suddenly the government in any other country that gives better healthcare would be a better option. Whichever government builds the best life quality will have more citizens and more tax money...unless/until this also is put out of control for a citizen...then what? Would some kind of -ism enter worldwide?

You raise a good point. Eventually when everyone is paying the same personal and corporate tax rate the factors that will make one choose one country over another will be quality of life. One will go where there is good weather, low crime, cheap lifestyle, good affordable healthcare, low corruption, good infrastructure and lots of amenities. It will be interesting to see which countries would prosper in such a situation.
 

Tango2015

Mentor Group Gold
I suppose this is the real question - will 'minimum' really mean minimum payable and that taxes cannot be reduced via deductions, credits etc?
In Malta the corporate income tax is 35% but 6/7th is being refunded, so effective 5% tax is paid. I see no problem for low or tax free countries to follow this example
 

Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
Yes the true test is the effective tax rate people pay. There a a few high tax countries but with low effective tax rate such as Malta etc. The proof of the pudding is in the text of what they agree. No point having a minimum 15% tax rate but a country offers a 99% rebate.
 

22kay

New member
It will be the same countries who are currently calling for a global minimum tax. That is actaully one of the reasons why they want to eliminate tax competition.
Why? If everyone pays the same everywhere, why would these countries be the most popular, unless the freedom to live anywhere is reduced by financial reasons? Will the really wealthy (and/or with power) be the only ones to have real choices in regards to life quality?
 
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