Plans for a global minimum corporate tax rate could be agreed by mid-year after finance ministers from the G20 economies met virtually to discuss a tax overhaul for international companies.
How much would a globally agreed interest rate have, however?
CGTN Europe spoke to Tommaso Faccio, Head of the Secretariat of the Independent Commission for International Business Taxation Reform (ICRICT), who said the move was “a pioneer” in the fight against tax havens.
“It will set a floor so that multinational corporations pay a minimum tax in every country they operate so that they can no longer shift their profits to tax havens,” he said. “This is a reflection on new thinking, that is, lowering taxes for businesses will not stimulate investment.
“We have seen that in the UK with the proposed changes, corporate tax will increase to 25 percent [in 2023]. We have seen that this new proposal in the US increases corporate tax from 21 percent to 28 percent, but also seeks to increase the country-to-country minimum tax to 21 percent.
“So if there are profits on US multinationals in the Cayman Islands or Ireland, they will ultimately be taxed at 21 percent in the US.”
World Bank President David Malpass expressed concern about the proposed minimum rate of 21 percent, suggesting that it could affect the ability of poorer countries to attract large businesses.
Faccio, also a lecturer in taxes at Nottingham University Business School, told CGTN Europe that he disagreed with this assessment: “The data shows that financial flows are going to countries in the global south, but this does not lead to increased investment.”
The US government sponsored such a plan as part of the infrastructure overhaul of President Biden’s US employment plan worth $ 2.3 trillion. Treasury Secretary Janet Yellen explained the proposal as a way to end “a 30-year race to the bottom”.