Japan: G20 to agree minimum effective corporate tax rate
THE Group of 20 (G20) economies are expected to agree to set international rules specifying a minimum for their effective corporate tax rates, at the G20 Finance Ministers and Central Bank Governors’ meeting to be held in Fukuoka on June 8-9.
An effective corporate tax rate combines national and local-level taxation on firms. The G20 move is aimed at stopping multilateral corporations from avoiding tax.
It is unusual for the international community to cooperate in setting tax rates. They will aim to reach an agreement by next year and discuss issues such as specific figures and taxation methods.
There is deep-rooted criticism of multilateral corporations as they shift their profits to tax havens, countries with extremely low or zero tax rates, to reduce their tax payments. The international community will set up minimum tax levels to reduce tax avoidance.
For example, it is assumed that when income is shifted to a subsidiary in a country with lower tax rates than the minimum, the country that is home to the parent company would be able to count this income among the parent company’s total income and impose relevant taxes.
G20 is discussing international taxation methods in the digital economy in cooperation with the Paris-based Organisation for Economic Cooperation and Development (OECD). OECD was to unveil a work plan as early as on Friday on creating new international rules, including the setting of a minimum tax rate.
The plan will be submitted to the G20 meeting in Fukuoka and is expected to be approved.