An agreement was reached between the OECD countries for the introduction of the Global Minimum Tax at 15%, an innovative tax, which among other things will influence the future activities of multinationals.
One of the reasons for its introduction is to stem the problem of tax correspondence between the country in which the revenues originate and those in which the tax burdens are paid. Therefore, the tax obligation of multinationals is assumed in the markets in which they have commercial activities and make profits, regardless of whether the companies have a physical or legal presence there. The agreement was announced a few days before the G20 of finance ministers scheduled in Washington on 13 October and the G20 summit in Rome at the end of the month, under the presidency of Mario Draghi. The only four countries that have not joined the agreement are Kenya, Nigeria, Pakistan, and Sri Lanka, while the countries of the European Union have joined unanimously. The agreement will be submitted to the G20 meeting and will ensure the application of a minimum corporate income tax rate of 15%, starting from 2023, for companies with over € 750 million in turnover. As many as 136 countries out of 140 in the OECD / G20 Inclusive Framework have announced that they are in favor of this agreement, and these represent over 90% of world GDP. Countries will also have more opportunities to tax multinational companies operating within their borders, even if they don’t have a physical presence there.
The reasons for the Global minimum Tax
Last March, US President Joe Biden, and US Treasury Secretary Janet Yellen began talking about a global minimum tax, and their proposal called for a 21% tax rate on corporate profits. Decisive to reach an initial agreement, before the G7 and the meeting with the OECD, with the aim of countering avoidance and the so-called profit shifting, that is, the transfer of multinational profits to countries that impose lower taxes. Suffice it to say that 40% of the profits of large global multinationals are safe in tax havens, where taxes are much cheaper. The era of fiscal dumping is over, with lower taxes granted by some countries to foreign companies in order to attract employment and generate income. In fact, according to estimates by the Fair Tax Foundation, in the last 10 years the six biggest big names in Silicon Valley – Facebook, Apple, Amazon, Netflix, Google, and Microsoft – have saved more than 96 billion dollars in taxes in comparison with their actual financial ratios. OECD, Organization for Economic Co-operation and Development, says the deal could lead to an extra $ 150 billion (£ 108 billion) in taxes per year, bolstering economies as they recover from Covid.
The main technical problems are those related to the common rules for transfer pricing, namely what are the assets to which they apply and above all how intangible ones such as software, copyrights, and patents should be considered. The “fair value” of transfer prices is the principle to be applied to the “intra-group” exchange of goods and services. The correct application of prices for goods and services exchanged between the parent company and related companies is decisive for the equal distribution of income between related parties. Unbalanced transfer pricing policies can bring tax savings for companies, although tax authorities have the tools to tackle tax avoidance. Multinationals have the right to notify the authorities in advance of the transfer pricing method adopted for intra-group distribution, demonstrating that it complies with OECD standards. However, companies can sometimes also use (or abuse) this practice by directing their taxable income to lower taxing countries, thereby reducing the Group’s overall taxes.
Source: www.fiscooggi.it
