More than 130 countries have forged a deal on sweeping changes in how big global companies are taxed. The most important feature: a global minimum tax of at least 15%. Here's a look at key aspects of the deal.
FILE - In this Monday, Nov. 18, 2019 file photo, the logo of Google is displayed on a carpet at the entrance hall of Google France in Paris. On Thursday, Oct. 7, 2021 Ireland agreed to join an international agreement establishing a minimum corporate tax of 15% around the world, ditching the low-tax policy that has led companies like Google and Facebook to base their European operations in the country.
The goal: deterring multinational companies from stashing profits in countries where they pay little or now taxes — better known as tax havens. Some countries compete for revenue by using rock-bottom rates to lure companies, attracting huge tax bases that generate large revenue even when tax rates only marginally above zero are applied. Between 1985 and 2018, the global average corporate headline rate fell from 49% to 24%. By 2016, over half of all U.S. corporate profits were booked in seven tax havens: Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore, and Switzerland. That costs the U.S.
A 20% to 30% minimum was recommended by the UN’s high-level panel on International Financial Accountability, Transparency and Integrity. In a report earlier this year, the panel said that a rate that is too low can incentivize countries to lower their rate to remain competitive. U.S. participation in the minimum tax deal is crucial, simply because so many multinationals are headquartered there. Complete rejection of Biden’s global minimum proposal would seriously undermine the international deal.
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