The G7 nations have agreed to close the tax loopholes across the border
The Finance Ministers from the richest seven-nation G7 (G7) group on Saturday reached a landmark agreement on lower corporate tax rates on the world, an agreement that could form the basis of an international agreement.
The agreement aims to put an end to what US Treasury Secretary Janet Yellen has called a “30-year race down corporate tax rates” as countries compete to attract international attention.
Why the global minimum tax?
Major economies aim to discourage the world from shifting profits - and tax revenues - to low-income countries regardless of where their sales are made.
Increasingly, revenue from intangible sources such as patents, software and royalty for intellectual property has shifted to these authorities, allowing companies to avoid paying higher taxes in their home countries.
With its proposed 15% lower tax rate, Biden's administration hopes to reduce the erosion of the tax base without putting American companies at risk of financial ruin, allowing for new competition, infrastructure and other factors.
Where did it take place?
The G7 talks are entering a broad, existing effort.
The Organization for Economic Cooperation and Development has been co-ordinating tax negotiations between 140 countries for years with a policy of taxing digital cross-border services and preventing erosion of the tax base, including lower corporate taxes.
The OECD and G20 countries aim to reach a consensus on both sides of the year, but negotiations on global corporate governance are technically simple and less controversial. If a comprehensive agreement is reached, it will be very difficult for any low-income country to try to block the agreement.
The minimum is expected to be a maximum of $ 50 billion- $ 80 billion in additional taxes the firm estimates that firms will eventually pay the rest of the world under agreements on both sides.
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How will concept of global minimum tax work?
The lowest tax rate in the world will apply to overseas profits. Governments can still impose any local corporate tax they want, but if companies pay lower prices in a particular country, local governments may be able to "raise" their taxes at a lower rate, eliminating profits.
The OECD said last month that governments were generally in agreement on the basic structure of the tax but not the rate. Other issues to be discussed include whether investment funds and investment investments should be covered, in which a new rate will be put in place to ensure compliance with U.S. tax reforms. Aimed at preventing erosion.
What about that lower level?
The talks focused on the US proposal for a 15% lower global tax rate - above the level in countries like Ireland but below the G7 lowest level.
Any final agreement could have far-reaching effects on low-income countries and taxpayers.
The Irish economy has boasted of a multi-billion dollar investment from around the world. Dublin, which opposes EU efforts to harmonize its tax laws, is unlikely to accept a lower rate without a fight.
However, the war on low-income countries is less likely to be by fraudulent collective bargaining and more by building support as low as possible at 12.5% or by demanding certain exemptions.
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