During the recent G20 (the twenty Countries with the strongest economies in the World) meeting held in Rome, the participating Governments endorsed the project to impose a global minimum tax on corporations, with the aim at avoiding the possible choice of favorable tax paradises by multinational companies in order to minimize the relevant taxation on the proceeds from their business activities carried out all over the World.
The G-20 finance ministers in July 2021 had already agreed upon a 15% minimum tax. Such proposal was formally endorsed during the summit of the G20 Governments during the meeting held in Rome.
The finally approved minimum tax was lower than the U.S. President Joe Biden's original proposal for a 21% minimum tax, however the final mutually agreed-upon level of taxation was welcome by him and the other participants as a significant positive reshaping of the global economy.
The agreed-upon taxation system aims at discouraging multinational companies from accounting and concentrating profits only in countries where they pay little or no taxes. In particular, the new taxation approach can challenge the way such companies earn big profits by trading on intangible assets like trademarks and intellectual property, whose earnings are usually assigned to subsidiaries located in some tax haven country. The German Chancellor Angela Merkel has in turn commented that such measure can be justified in times of “digitalization”, given the fact that profits can quickly and simply move from one place to another pursuant to such digital instruments. Same remarks were made by Mathias Cormann, secretary-general of the Paris-based Organization for Economic Cooperation and Development, who said that the new minimum rate of taxation “completely eliminates the incentive for businesses around the world to restructure their affairs to avoid tax”.
According to some U.S. Government officials, the new tax rate would create at least USD 60 billion in new revenue a year in the sole U.S.A.: in fact, U.S. adoption of such new tax measure is key, having in mind that so many multinational companies which have been using so far some favorable tax-heaven jurisdictions to arrange their affairs and save taxes, are headquartered there.
On the other side, a rate of 15% is still considered to be quite low and can force some Government to review its approach to this issue in order to become more competitive at global level and attract foreign investors.
While such developments are occurring, the OECD member-States are discussing the possibility to reach consensus on a convention for the application of a global tax to multinational companies. The final outcome of this discussion and timing for its implementation is still uncertain, though.
Prof. Avv. Salvatore Vitale
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