The Economist on global corporate tax:
Officials signed up to a five-page statement with two main elements: a new minimum tax rate on multinationals’ profits; and a reallocation of the right to tax those of the largest, away from places where they register their assets and towards where they make their sales. In return for those new tax rights, governments would refrain from some unilateral measures, notably taxes on giant technology companies. Securing agreement from so many countries on such a touchy issue is a remarkable feat. Even so, there is more work to do before the future of corporate taxation is settled.
[...]The deal is structured to affect more companies as time goes by. At first the reallocation of taxing rights will apply to those with global turnover above €20bn ($24bn). But if all goes well, that threshold could fall to €10bn. To address the common complaint that digital companies can make profits somewhere without registering the physical presence often necessary to tax them, governments will be able to levy some tax if local revenues exceed just €1m. In small, poor countries with GDP of less than €40bn the threshold will be only €250,000.
[...]Having secured a high-level agreement, negotiators have agreed on a deadline of October to settle important details. Some countries are pushing for a minimum tax rate of 15%; others want the floor to be higher. The base of profits subject to the minimum tax, the precise amount of taxing rights to be reallocated and the precise scope of unilateral measures to be withdrawn also have to be hammered out.
After that, in 2022 governments must draw up an international treaty to reallocate taxing rights, to be implemented in 2023. The deal also envisages that minimum taxes might be legislated for in 2022 and implemented in 2023, though countries could do that without waiting for a treaty. The agreement is a big step forward. But plenty of taxing work still lies ahead.
