The G20 nations have agreed to endorse a global minimum corporate tax at the recent Rome summit. The fiscal framework has been offers by the OECD in July 2021 as a method for contest new tax issues that were created by an increasingly digital economy.
The tax framework is aimed at multinational technological entities that have a worldwide turnover of more than 20 billion euros. More specifically Google, Amazon and Facebook. It takes a top-down, multilateral approach to prevent tech conglomerates from using tax havens to hide their profits. US Secretary of the Treasury Janet Yallen declared that it also aims to prevent countries from abusing low tax rates in countries with minimum activity.
Exemptions will be decreed to avoid double taxation of profits allocated to the market. Provisions on tax security, dispute prevention and resolution will also be provided for companies subject to the framework.
G20 members represent 80% of global GDP. Different nations are expected to benefit more from the framework than others. The Wall Street Journal speculates that there will be an increase in tax revenues of $ 1.5 billion to $ 2 billion for developing countries. US President Joe Biden also suggested the new framework would deter companies from outsourcing jobs and shifting profits overseas.
Its status as a proposed international treaty would mean countries would have to ratify the framework to give it legally binding status. The International Tax Review waits that other fiscal initiatives concerning carbon emissions will be considered before the presentation of the final plan.
The 2021 United Nations Climate Change Conference (Cop26) kicked off in Glasgow on Sunday. Issues related to climate change and international tax policy are likely to be discussed synchronously.
The rule is expected to come into effect by 2023.