Justifying the significance of a global tax

Discouraging multinationals from shifting profits and tax revenues to low-tax countries regardless of where their sales are made.

08 June 2021 | Economics

LEIGH THOMAS AND DAVID LAWDER

Finance Ministers from the Group of Seven (G7) rich nations reached a landmark accord on Saturday backing the creation of a global minimum corporate tax rate of at least 15%, an agreement that could then form the basis of a worldwide deal.

Such a deal aims to end what US Treasury Secretary Janet Yellen has called a "30-year race to the bottom on corporate tax rates" as countries compete to lure multinationals.

Major economies are aiming to discourage multinationals from shifting profits and tax revenues to low-tax countries regardless of where their sales are made.

Increasingly, income from intangible sources such as drug patents, software and royalties on intellectual property has migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries.

The G7 accord feeds into a much broader, existing effort. The Organization for Economic Cooperation and Development (OECD) has been coordinating tax negotiations among 140 countries for years on rules for taxing cross-border digital services and curbing tax base erosion, including a global corporate minimum tax.

The OECD and G20 countries aim to reach consensus on both by mid-year, but the talks on a global corporate minimum are technically simpler and less contentious.

Minimum rate

If a broad consensus is reached, it will be extremely hard for any low-tax country to try and block an agreement. The minimum is expected to make up the bulk of the US$50 billion-US$80 billion in extra tax that the OECD estimates firms will end up paying globally under deals on both fronts.

Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could "top-up" their taxes to the minimum rate, eliminating the advantage of shifting profits.

The OECD said last month that governments broadly agreed on the basic design of the minimum tax but not the rate. Tax experts say that is the thorniest issue, although the G7 accord creates strong momentum around the 15%-plus level.

Other items still to be negotiated include whether investment funds and real estate investment trusts should be covered, when to apply the new rate and ensuring it is compatible with US tax reforms aimed at deterring erosion.

A G20 meeting scheduled for Venice next month will see whether the G7 accord gets broad support from the world's biggest developing and developing countries. - Nampa/Reuters

Similar News

 

Namibia’s tourism sector walking on thin ice

2 days ago - 30 July 2021 | Economics

PHILLEPUS UUSIKU Due to limitations to the number of people at gatherings, reduced opening hours for restaurants and bars and moreover travel restrictions, the tourism...

South Africa plans billions in relief

2 days ago - 30 July 2021 | Economics

ALEXANDER WINNING AND WENDELL ROELFSouth Africa plans about R36 billion of relief measures to support businesses and individuals affected by unrest this month and by...

SA unions agree to wage deal

2 days ago - 30 July 2021 | Economics

The majority of public sector unions in South Africa have signed a one-year wage hike deal, a cabinet minister said on Tuesday, as government looks...

Namibia’s economic recovery ‘disgraceful’

3 days ago - 29 July 2021 | Economics

Jo-Maré Duddy – Dragging vaccine roll-out and the re-imposition of some lockdown measures during the third wave of Covid-19, as well as lower than expected...

Govt caught with its pants down

3 days ago - 29 July 2021 | Economics

Jo-Maré Duddy – Government must open-up the import of Covid-19 vaccines to the private sector to fight the third wave, prevent a fourth and help...

Public and private sector collaboration crucial

3 days ago - 29 July 2021 | Economics

The power of unity cannot be overemphasised. Indeed, Namibia has experienced, and is still experiencing the effects of a people united towards a common goal...

Fighting the fire of discontent

4 days ago - 28 July 2021 | Economics

Jo-Maré Duddy – Although Namibia shares a similar volatile cocktail of high inequality, poverty, unemployment, corruption and waning trust in political powers than South Africa,...

Livestock marketing gaining momentum

4 days ago - 28 July 2021 | Economics

PHILLEPUS UUSIKUDue to the unavailability of animals in the market for the month of April 2021, there was a massive decline in the number of...

African central banks to hold rates steady

4 days ago - 28 July 2021 | Economics

VUYANI NDABAMajor sub-Saharan African central banks are expected to keep interest rates on hold this week as the region's recovery lags the rest of the...

Africa demands local production of vaccines

4 days ago - 28 July 2021 | Economics

Global pharmaceutical firms should license production of Covid-19 vaccines in Africa rather than just do piecemeal contract deals, an African Union special envoy has said.By...

Latest News

On the brink of burnout?...

2 days ago - 30 July 2021 | Business

Selma Shilunga 1. Talking about your feelings is importantWe often keep our true feelings bottled up, saying “I’m fine”, even when we’re really not....

Kristofine Itembu proves that the...

2 days ago - 30 July 2021 | Business

Rivaldo KavangaHailing from Onankali village in the Oshikoto Region and raised in the dusty streets of Soweto in Katutura, the career-driven Kristofine Itembu remains humble...

Pensioner loses N$50k to scammers...

2 days ago - 30 July 2021 | Crime

TUYEIMO HAIDULA OSHAKATI A 60-year-old retired teacher lost N$50 000 to scammers who pretended to be police officers on Monday...

Ex-general implicated in Ekandjo’s missing...

2 days ago - 30 July 2021 | Justice

Kenya Kambowe RUNDUFormer minister Jerry Ekandjo’s name has surfaced in court as one of the possible victims in a stock theft case in which former...

South Africa plans billions in...

2 days ago - 30 July 2021 | Economics

ALEXANDER WINNING AND WENDELL ROELFSouth Africa plans about R36 billion of relief measures to support businesses and individuals affected by unrest this month and by...

The man who works fast...

2 days ago - 30 July 2021 | Business

Sono Kahuure runs the network escalations department at Paratus Namibia and is the keyholder to unlocking solutions for his customers. Sono is the go-to man...

Taking sports development to the...

2 days ago - 30 July 2021 | People

Mariselle Stofberg Powerful play From growing up in the dusty streets of Okuryangava, Titus Mwahafa’s passion for sport and sports development has driven him...

“I imagined a better life...

2 days ago - 30 July 2021 | Business

Desiree GasesTST was founded in 2012 and is a full-service advertising and market research company combining qualitative and quantitative approaches to deliver rich, operational, and...

EDITORIAL: Fix Windhoek’s leadership mess

2 days ago - 30 July 2021 | Opinion

Windhoek is without political leadership. But that’s not the saddest part. The fact that, for a week, nothing concrete has been hammered out to restore...

Load More