It is being called a historic development. Others are touting it as an unprecedented occurrence. India’s a key part of it. But, then as are 135 countries from the rest of the world. The mood right now in the world of business and economy is about the mega global corporate tax deal. It’s implications set to affect the global sphere of corporate business.
But then, let us first ask a basic question.
Just what is the Global Corporate Tax Deal about and what to make of it?
Earlier today, i.e., October 9, 2021, the Organisation of Economic Co-operation and Development, which is also known as the OECD (headquartered in Paris, France) confirmed that no fewer than 136 countries have now agreed to the new Global Corporate Tax deal.
Apparently, ever since assuming office late 2019, American President Joe Biden had been routing for it and pushing for a case. And now the breakthrough has been reached.
In what can be inferred as a big change on the horizon, the agreement of 136 of the world’s countries towards the Global Corporate Tax Deal puts an end to the plans of those nations that had been desiring to attract investment as also create new jobs by subjecting the multinational companies ‘lightly,’ on the tax front, effectively allowing them to get lower tax rates.
Now the floor has been set for 15 per cent, which is fundamentally well below the current corporate tax rate levied in the industrialised countries, it standing at 23.5 per cent.
But that said, there are two fundamental pillars to the Global Corporate tax deal. So what are those?
1. A global minimum tax. This now stands at 15 per cent. Now originally, this had been agreed to by most countries back during the month of July, 2021. Though, nations like Ireland, Hungary, and Estonia had held out of this decision. They now stand to benefit in that their tax stands at 12 percent, which is clearly a major concession.
2. The other big fundament to the Global Corporate Tax deal is that it aims to tax companies with revenues with 20 billion (in Euros) and 10 per cent profit margin to be taxed in areas where they sell goods, not just where they just headquarter the goods.
Digital service taxes, in this regard, will come into effect, which may not necessarily profit the United States that stands to lose money. But, well, we shall see.
Furthermore, the following excerpts from a Reuters report shared the following developments with regards to the biggest piece of news from the realm of Business and Finance:
Establishing, for the first time in history, a strong global minimum tax will finally even the playing field for American workers and taxpayers, along with the rest of the world,” Joe Biden said in a statement.
The deal aims to stop large firms booking profits in low-tax countries such as Ireland regardless of where their clients are, an issue that has become ever more pressing with the growth of “Big Tech” giants that can easily do business across borders.
Out of the 140 countries involved, 136 supported the deal, with Kenya, Nigeria, Pakistan and Sri Lanka abstaining for now. The Paris-based Organisation for Economic Cooperation and Development (OECD), which has been leading the talks, said that the deal would cover 90 per cent of the global economy.