It all seemed too good to be true:\u00a0a\u00a0global campaign to stamp out tax avoidance and harmonize\u00a0international tax rules for companies that operate across national borders.At the forefront of the transparency drive is a minimum tax rate for multinational corporations, no matter where they operate. No more exploiting tax loopholes and shifting profits to countries with a low tax rate\u00a0to avoid paying their\u00a0fair share of taxes.<\/p>\n
The Organization for Economic Cooperation and Development (OECD) says $240 billion (\u20ac223\u00a0billion) is lost each year through such tax avoidance. Discussions about unifying taxation of corporations have\u00a0gone on for years.<\/p>\n
In 2021, it seemed that a consensus had been reached in the OECD\/G20 Inclusive Framework. Now over 140 countries from Albania to Zambia are negotiating to implement the deal.<\/p>\n
The global\u00a0tax cooperation deal has two pillars: certain taxable income will be shifted, and taxed, to where it is earned, and a global minimum tax will be levied on corporations.<\/p>\n
The latter, a\u00a0global minimum tax, is a mechanism to ensure companies pay taxes without using loopholes or low-tax jurisdictions to avoid taxes.<\/p>\n
The current model sets a 15% corporate tax rate on multinationals with revenues in excess of \u20ac750 million in at least two of the past four years. Companies that pay some tax but not 15% will have to “top up.”<\/p>\n