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GLOBALOUTLOOK TAXPOLICY


TheFDI impact of global minimumcorporate tax


US PROPOSALS HAVE REIGNITED TAX TALKS AND HAVE THE POTENTIAL TO REFRAME INVESTMENT DECISIONS, ALEX IRWIN-HUNT REPORTS


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fforts to close loopholes exploited by multinational corporations (MNCs) to reduce


their tax bills came to a head on June 4-5. At a meeting in London, G7 finance ministers agreed to commit to a global minimum tax of at least 15%on a country-by-country basis. At a news conference after the


meeting, US Treasury Secretary Janet Yellen said: “For too long there has been a global race to the bottom in corporate taxes, where countries compete by lowering their tax rates” rather than focusing on the wellbe- ing of their citizens and natural environments. “The G7 has taken significant


steps this weekend to end the exist- ing harmful dynamic, making com- mitments today that provide tre- mendous momentum towards achieving a robust global mini- mumtax at a rate of at least 15%,” she added. The G7 agreement comes after the US published its ‘Made in


America’ tax plan in April, aimed at removing incentives for US compa- nies to offshore investment, reduce profit shifting across borders and create tax preferences for clean energy production. The IMF esti- mates that the use of tax havens costs governments $500bn to $600bn in lost corporate tax revenue each year. Experts are optimistic the pro-


posals could lead to an agreement on long-running talks to reform global taxation under the auspices of the Organisation for Economic Cooperation and Development (OECD). But questions remain over the impact on tax-based incentives used to attract investment and whether it is more aligned with the interest of the US and other advanced economies.


Renewedimpetus The US originally proposed a global minimum effective tax rate of 21%, but reduced this to at least 15%to


gain support from dissenting coun- tries. This has given newmomentum to the negotiations between 139 countries promoted by the OECD within the context of its Global Anti- Base Erosion (Globe) initiative, which calls for the introduction of a global minimum tax forMNCs. Pascal Saint-Amans, OECD head


of tax policy and administration, tells fDi that he is “positively impressed” with the US proposal and that it aligns with the OECD’s exist- ing work on reforming the global tax system. “The big winners of globali- sation, the largestmost profitable companies, nowall include the big tech giants, which would be signifi- cantly impacted by the reallocation of taxes under these proposals,” he clarifies. The “race to the bottom” cited by


Ms Yellen has seen the average head- line corporate tax rate in advanced economies fall from32%in 2000 to just over 23% by 2018. In 2018, the US collected among the lowest corpo-


Big news: US Treasury secretary Janet Yellen addresses the press after attending the G7 Finance Ministers meeting in London 40 www.fDiIntelligence.com June/July 2021


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