Winners and losers from minimum tax on multinationals
VENICE: G20 finance ministers meeting in Italy will discuss a reform of taxation on multinational firms that is meant to stop nations from using ultralow tax rates to attract businesses.
The world’s top economies would be the biggest gainers of the OECDbrokered preliminary deal, while tax havens would be the biggest losers.
Big countries to win
The United States, Germany, France, etc... the world’s biggest countries are where multinationals do most of their business but are less and less likely to have their tax homes. These countries stand to benefit from a measure that would redistribute part of the corporate taxes raised to nations where multinationals actually make their profits.
The imposition of a minimum rate of 15 percent (with fewer possibilities to lower it) would also increase the amount of tax money to be distributed. According to the OECD, which led negotiations that produced a draft tax reform agreement among 131 nations, setting a minimum effective tax rate of 15 percent would generate an extra $150 billion in revenue per year.
Many nations have rates higher than 15 percent on paper, but with so many exemptions that companies end paying much less. Most of these exemptions would be closed, so companies would end up having to pay at least 15 percent. The CAE, a body charged with providing economic analysis for the French government, has calculated that Paris would likely get an extra six billion euros in tax revenue per year.
Germany would likely receive 8.3 billion euros and the United States nearly 15 billion.
China would also likely benefit as it is expected to be able to continue to provide certain tax incentives to support business development. The details on what tax incentives might remain have yet to be finalized, however.
Tax havens to lose Countries that set their tax rates low in order to lure businesses, including tax havens that charge little to no tax, stand to lose the most. While Barbados and Saint Vincent and the Grenadines have balked at the deal, other tax havens like Panama, Bermuda and the British Virgin Islands have nonetheless
signed up.
“They’ve realized that they don’t have the capacity to block an international deal and calculated that it’s in their interest to be cooperative,” said Nicolas Veron, an economist at the Peterson Institute for International Economics in Washington and the Bruegel Institute in Brussels. — AFP