Global minimum tax faces ‘long and rocky path’ to implementation after G20 endorsement
- Group of 7 leaders agreed in early June to a global minimum tax rate of at least 15 per cent, which is expected to be endorsed by the Group of 20 next month
- But the proposal also needs to be agreed to by nearly 140 countries known as the Inclusive Framework and could take up to five years to take effect
A new global minimum corporate tax could take up to five years to come into effect if endorsed by the Group of 20 (G20), with countries such as India likely to be beneficiaries, tax consultants say.
G20 finance leaders are set to endorse a global corporate tax floor aimed at preventing multinationals from shifting profits to jurisdictions where they pay little or no tax when they meet next month, according to a draft communique reviewed by Reuters.
“The initiative to set up a global minimum tax faces a long and rocky path to implementation, as it will require the agreement of sitting governments and lawmakers, including in the EU and the US,” said Swarup Gupta, industry manager at The Economist Intelligence Unit.
A reform broadly along these lines is likely to take effect in the next two to five years
“However, a reform broadly along these lines is likely to take effect in the next two to five years.”
The G7 proposal needs to be agreed to by nearly 140 countries known as the Inclusive Framework at an online meeting next week hosted by the Paris-based Organisation for Economic Cooperation and Development. Details of the meeting will then be sent to G20 finance ministers and central bank governors before they gather in Venice next month.
Gupta said non-G7 members of the G20 would be “broadly favourable to the reform, although apart from China their governments and firms are unlikely to be important net tax recipients or payers”.
China, which has a nominal corporate tax rate of 25 per cent and grants a 15 per cent rate to some hi-tech companies, has not yet released an official position on the reform.