The global minimum corporate tax approved at the G20 Summit will be very upsetting to tech companies. Here are the details of the deal…
Decisions on tax were also announced at the G20 Summit, which brings together the world’s 20 largest economies. Under the new tax deal, large businesses, including technology companies, will no longer be able to flee to countries described as‘taxhavens’.
The ‘historic’ change is likely to have a major impact on the European operations of US-based technology companies. That’s because most of these companies are in Ireland to take advantage of the lower tax rate of 12.5 per cent. However, it provides services throughout the continent.
Here are the details of the new global minimum corporate tax approved by the leaders…
G20 leaders approve global minimum corporate tax
At the G20, leaders approved a global minimum corporate tax that would prevent companies from hiding their profits. That way, global firms including Google, Microsoft, Amazon and Facebook will be subject to a tax rate of at least 15 percent. The agreement will take effect from 2023.
Furthermore, according to the decision at the G20 Summit, the new tax rate will not affect all companies. The 15 per cent tax base will apply to companies with revenues above €750m. So it’s limited to the biggest companies in the world. Also in October 2021, the Organisation for Economic Co-operation and Development (OECD) announced this so-called tax agreement. According to the OECD, 136 countries adopted the agreement.
With the adoption of the global minimum corporate tax, tech companies will no longer be able to travel to tax haven countries trying to attract investors to avoid tax. If these companies shift their profits to a low-tax country, they will have to pay “additional” tax in the country where it is headquartered. Because of these provisions, the agreement is considered the biggest reform of international validity in recent years.
The OECDexpects even this deal alone to bring in close to $150 billion in additional tax revenue worldwide. Almost all OECD countries – even tax havens such as theCayman Islands – had given the necessary approvals before the deal. G20 countries have also agreed on the issue since last