Several of the leaders of the world’s top twenty countries have finally agreed on a global minimum corporate tax rate. During the opening session of the G20 summit in Rome, Italy, G20 leaders supported the OECD plan. It would require companies meeting certain criteria to pay a corporate tax rate of at least 15%.
The OECD announced earlier this month that 136 countries had agreed on a minimum corporate tax rate of 15%. 136 countries, including the G20, account for more than 90% of global gross domestic product (GDP).
By ratifying the ministerial meeting agreement, leaders agreed to a minimum corporate tax rate.
Multinational corporations taxation will amount to at least 15 percent on their profits. The lower limit is 15%.
Foreign media believes that the minimum corporate tax rate agreement will benefit developed countries the most. A study estimates that if the global minimum corporate tax rate were implemented in every country, the additional tax revenue would be 15 times that of China.
It is unlikely that the developed countries would absorb any of it. Another analysis estimated that 52 developing countries would receive between $1.5 and $2 billion in tax revenue annually. In contrast with the expected annual tax revenue of $150 billion at the lowest global corporate tax rate, the share of developing countries is very small.
The implementation of a global minimum corporate tax rate plan will make it difficult and insignificant for multinational corporations to divert their profits to low corporate tax rate countries, such as Ireland. Since at least 15% taxation on profits applies in every country, the tax burden falls on the country of establishment.
The global minimum corporate tax rate has been the subject of discussion since 2013.
Ratification by the United States, in particular, poses the greatest challenge. Indeed, due to the 50-50 split between Republicans and Democrats in the Senate, ratification of international treaties are not certain.