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Governance, risk & compliance
Rethinking global taxation
The world’s leading economies have agreed a historic deal to ensure multinationals pay more tax – a move the OECD says will “level the playing fi eld” across the globe. One way or another, in fact, the deal will alter the way multinationals pay tax and shape the global tax environment for years to come. Lynette Eyb discusses the signifi cance of the agreement with Panayiotis Nicolaides, the EU Tax Observatory’s director of research.
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t was the big-ticket item of the G7 meeting in Cornwall in June – a deal that would transform the international tax landscape and ensure multinationals paid their fair share of tax. The deal – known officially as the ‘Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy’ – falls under the umbrella of the joint OECD/G20 Base Erosion and Profit Shifting Project. It was approved by G20 finance ministers in July, and is scheduled to come into force in 2023. The agreement is intended to redraw the international rules around tax, giving
countries a more equitable share of profits from around 100 of the world’s most profitable companies regardless of where they’re headquartered. Where they do business – and where they make their money – will instead be what matters. The agreement is based on two central pillars. The first applies to companies with global annual revenue of at least €20bn and profitability above 10%. It links taxation to revenue irrespective of a company’s physical footprint. The agreement states that 20–30% of residual profits should be reallocated to jurisdictions where money is made, or its customers are located.
Chief Executive Offi cer /
www.the-chiefexecutive.com
Harvepino/
Shuttterstock.com
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