The Global Minimum Tax is a milestone in international taxation. This agreement, promoted by the Organization for Economic Cooperation and Development (OECD) and supported by over 130 countries, intends to ensure that large multinationals pay at least 15% tax on their profits, regardless of where they operate.
Conversely, what does this measure entail, and how does it affect the global economy? Herein, we will address the details of this proposal, its effects on developing countries, responses from non-G7 countries, and other key-related issues.
What Is the Global Minimum Tax?
The Global Minimum Tax is a policy against tax evasion that limits the use of tax havens. It mainly ensures that large multinationals, particularly those with revenues exceeding EUR 750 million per year, pay a minimum rate of 15% on their profits, regardless of where they declare or are registered. This measure, part of a global agreement promoted by the OECD and the G20, is structured in two fundamental pillars:
- Pillar 1: To reallocate part of the profits of large companies to the countries where they actually operate and generate income.
- Pillar 2: To establish a global minimum tax rate of 15%, reducing tax competition between countries and incentives to shift profits to low-tax territories.
Taxation of Multinationals and Effects on Technology Companies
The introduction of this tax intends to address tax avoidance by large multinationals, including technology companies such as Google, Amazon, Meta (Facebook), and Apple. These companies were criticized for taking advantage of legal loopholes and financial mechanisms, such as Transfer Pricing, to declare their profits in low-tax countries, even though they generate income in higher-tax markets.
Implications for Multinationals
- Higher tax payments: Multinationals will have to contribute a more significant percentage of their profits, which could affect their profitability.
- Redistribution of tax revenues: Countries where they operate and generate value will receive a greater percentage of taxes, improving tax collection.
- Change in tax strategies: Companies that shifted profits to tax havens before will have to restructure their financial models.
Technology Sector
Technology companies are particularly relevant because the globalized and digital environment where they operate has unclear tax boundaries. These companies must adapt it to comply with the new requirements, reducing their ability to take advantage of more favorable tax regimes.
Effects on Developing Countries
The Global Minimum Tax has significant implications for developing countries, although not always equally.
- Potential benefits: These countries could receive additional income from Pillar 1, especially if they succeed in reallocating profits from multinationals operating in their territories.
- Limitations: Some economists point out that the 15% threshold could not cover the fiscal needs of countries with emerging economies. In addition, these nations often lack the technical and administrative resources to implement and monitor the new regulations.
Developing countries are demanding greater recognition in the allocation of tax income, arguing that rich countries, the headquarters of many multinationals, are the principal beneficiaries.
Responses from Non-G7 Countries
Although the Global Minimum Tax proposal has been widely supported by the G7 and other advanced economies, some non-member countries have expressed resistance or uncertainty regarding its implementation.
Main Challenges:
- Tax havens: Countries such as Ireland or Barbados, which have prospered by attracting investment due to their low taxes, fear that this measure will reduce their economic competitiveness.
- Non-member countries: Some states, especially those with weak tax systems, could prefer not to adopt the agreement, which would create inequality and allow tax evasion.
- Regional tax competition: Developing countries are concerned that the current rules will still favor more advanced economies, restricting equal competitiveness.
Implications for the Global Economy
The global tax on multinationals significantly changes how countries cooperate to regulate the global economy. Its main effects include:
- Greater tax fairness: Multinationals will be subject to similar rules regardless of where they operate, leveling the playing field against local companies.
- Reduction of tax havens: The relevance of these territories could decrease with fewer incentives to shift profits.
- Challenges for foreign investment: Some low-tax countries are concerned that this measure will affect their ability to attract investment.
Conversely, the success of this initiative will depend on its effective implementation and continued cooperation among countries.
Conclusion
The Global Minimum Tax is an advance towards a fairer and more balanced tax system, seeking to combat tax evasion and ensure the fair contribution of multinationals. Despite the challenges, success will depend on international cooperation and ensuring inclusive benefits, especially for developing countries.
