G-20 Leaders Back 15% Minimum Corporate Tax Deal - Forbes

Topline

Leaders of the world’s 20 largest economies formally endorsed a global deal on corporate taxes at a meeting in Rome on Saturday aimed at stopping multinationals from shifting operations and revenues to countries that have enticed them with low rates to shield their profits.

Key Facts

The plan sets a 15% minimum tax rate for companies with annual revenue above 750 million euros ($865 million) and would require a smaller group of the largest multinationals — those with annual turnover of 20 billion euros ($23 billion) and profit margins above 10% to pay taxes in countries where they sell their products or services.

G-20 leaders committed to aim to implement the rules in 2023.

At home, Congress will have to pass legislation for the global tax changes to take effect.

Wealthy countries are to be the biggest beneficiaries of the deal, the Wall Street Journal reported, citing an analysis that the U.S. will raise tax revenues 15 times that of China.

The deal is anticipated to bring in $150 billion per year globally, according to the Organization for Economic Cooperation and Development.

Governments around the world lose $245 billion every year in corporate tax to tax havens, according to the London-based Tax Justice Network advocacy group.

Key Background

The Biden administration has been working to get the global tax deal across the finish line, which could prove necessary to fund the social spending and climate bill that it is struggling to get through Congress amid difficulties in getting key Democratic senators onboard with proposals to raise tax revenue at home. Biden has sought unsuccessfully to increase the corporate rate to 28% from the current 21% and then offered a compromise at 25%. The Trump administration had lowered the tax rate to current levels from 35%.

Surprising Fact

A total of 15 jurisdictions did not have a general corporate income tax in 2020, according to the Tax Foundation. Anguilla, Bahamas, Bahrain, Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, Saint Barthelemy, Tokelau, Turks and Caicos Islands, United Arab Emirates, Vanuatu and Wallis and Futuna Islands. At the top end, Bahrain levies corporate income tax rate as high as 46% on oil companies, while the separate emirates of the United Arab Emirates could impose a maximum 55% corporate tax rate on businesses.