Global Corporate Tax

The unprecedented global corporate tax regulation has hit a roadblock in the US.

• Around 137 nations including leaders of the G20 countries approved a global treaty in October 2021 that would tax multinational corporations a minimum tax rate of 15%.
• The Organisation for Economic Cooperation and Development (OECD) brokered this package which would put a levy on the world’s 100 biggest companies.
• This tax which covers countries making up 90% of the global GDP will tax companies in countries that they operate in and make profits, rather than just their physical locations.
• Four countries, Kenya, Nigeria, Pakistan and Sri Lanka, participated in the talks but are yet to sign the agreement.
• In the EU, Hungary has a corporate tax of 9% and Estonia has also raised concerns about minimum global tax rate on its foreign direct investment initiatives.
• While the global corporate tax will only come into effect in 2023, the roadblocks are already starting to show.
• Some companies are also exploring various tax related loopholes in various countries to avoid paying the full 15% tax as has been found in an investigation.
• In this reading, we get a good look at what the big deal about a single global corporate tax is about and why implementing it is a road paved with thorns.