Topic: Never seen before OCDE pact for 15% minimum global corporate tax (Read 318 times)

It's more for show than anything else.

As you said, most tax havens have tax rates of 15%+. And if they don't then they will probably readily oppose the proposal, in which case, what are the OECD countries going to do? The worst they can do is financial sanctions and I doubt that it would be very effective given that taxation revenue is what fuels these tax havens in the first place.

But you're right, it is a step in the right direction. I doubt it's enough, though.

I think the fact that one of the few countries not adhering to the global lower limit is  Ireland, is pretty much significative for the direction of the trade after being signed: vertical archiving in the dustbin

What was I saying?

https://www.wsj.com/articles/ireland-could-derail-global-tax-reform-11625220355


Welcome to the EU where a financial legislation reform needs unanimous votes so any country could lift the middle finger and from 130 countries having pact you're left with 100, and those 27 hosts one thrid of the largest corporations in the world. If the EU says No I don't see the others being stupid to shout yes either.

So, stick your taxes where they belong. I wonder what their backup plan on finding sources for free money to whoever votes for them? Maybe finally start working and stop spending other people's money? Really want to see this one happening!

Bermuda and the Cayman Islands are both signatories on the agreement, and Luxembourg's corporate tax rate is already higher than the proposed minimum in the agreement, so I reckon they would sign as well (though can't find definitively if they have already).  The 130 countries that have already signed represent 90% of global GDP, so yeah, my previous point stands unrefuted after your inaccurate post.

No, we need to stop putting differences because when you try to regulate something giving somebody an advantage the ones with more resources will be able to get that one too, splitting their business, changing the main activity of the selected business, hiring youngsters in on branch and so on.

Get rid of taxation altogether and start trying to run a country not by taking 70% of what people make.


How about we stop punishing anybody? You don't realize maybe that in the end, all this punishing ends up in our pocket.

Big business and not some stand-alone entities, they have workers, they have suppliers, they have customers and more importantly, they have investors that have put their money in that company and now are taking that profit. Why should people who have invested in Apple be punished more than people who have invested in smaller companies? Does it make sense?
Get rid of those damn taxes for everyone, leave just the profit tax for individuals, if someone wants to take in 100 million profit, tax him, if a company doesn't want to pay a dime to investors let it invest all that money in whatever they see fit. At one point they will have to cash out, they will have to distribute those profits they make.

That was the thing that Biden offered for USA and yet they still faced a lot of backlash over the fact that big corporations would not pay the taxes and not only they will not pay taxes that they pay now (meaning there will be less tax collected when tax goes up?) but they will send their money overseas to better taxed places just to save them. So, the reason for Biden tax plan is rejected by republicans.... wait for it.... is how horrible corporations are!

Well, how about we start by not giving them 2 trillion dollars worth of tax break when a republican is president? Or how about we give HUGE punishments when they do? NOOOOOOOOOOO republicans would never be alright with giving big corporations punishment, then who will bribe them? This is why this 15% will be bare minimum and I am sure eventually USA will get to that 15% as well when Republicans take control of all three congress/senate/presidency one day and say that is the global agreement.

LOL.. so around 130 out of approx. 200 countries signed up for this? It doesn't surprise me. Countries with high rates of corporate taxes will sign up, since it benefits them. On the other hand, tax havens (such as the Caribbean islands and gulf nations) would ignore this initiative, as it affects their revenues. In the end, the stalemate and status quo will persist. If Ireland agrees to this measure, then the companies will just relocate to some other tax haven, such as Luxembourg, Malta or San Marino. How much time it takes to shift HQ from one country to another?

Yes, corporations pay taxes. If you think that if taxes on corporations went away prices would suddenly drop for consumers, you're dreaming.  In fact, we saw this with the corporate tax cut from republicans 3-4 years ago.  Did prices drop?  No.  The executives gave themselves bonuses and bought back company stock, which further enriched the executives with stock options.  I'd rather corporations pay taxes and have an indirect cost passed on to consumers, which will be kept in check by competition, than eliminate corporate taxes and have the tax directly imposed on consumers by the government to make up for the lost revenue.

What we need is to put difference between business like your parents versus global business that makes 10+ billion dollars in profit. Do you realize how big 10+ billion dollars actually is? We are talking about nearly as much as some government make, and this is just one company, USA has a ton of those companies and other nations have a few of them as well.

It means instead of putting tax punishment on smaller business, how about punish all the big business? I know that will be hard because there are "poor" (as in not a billionaire) people who will defend amazon to not pay federal tax for some reason, no idea why people do that, they will never own amazon, so why do that? I have no idea but this is "standard company" all over again, we have too big monopolies. So drop the tax for shops like your parents, and increase any billionaire like a ton.

A good solution there is just one problem for politicians in your plan, this makes a great deal of them obsolete and they will have to get a real job instead of being parasites that suck dry the money of those they are supposed to represent, and the people do not help themselves either when they see politicians trying to tax the rich they think of this as Robin Hood stealing from the rich to give the poor, not realizing that stealing is stealing regardless of who is the victim and that soon enough they will face the same fate.

Nice post op and yes, the problem isn't and has never been the minimum. Even where there are tax breaks, those if done right are to incentivise new business to come up and to attract foreign investment.

The problem always has been and will continue to be aggressive tax optimisation -- skirting the law to legally avoid tax. Countries just have to make it as important to do a business, register it, and pay taxes in good faith. And hell, make them pay dearly for not doing so.

So the Netherlands has very high taxes, Holland is a tax paradise but the Dutch are getting get the short end of the stick  


I would love to see all the governments stop hunting those corporations just for the sake of votes and understand one simple thing, it's far easier to tax the individual than a multinational company. Look in my own case, my parents-owned business is paying tax, ok, now after that the part of the profit that transferred into own accounts as dividends, again gets taxed!!!! And from that profit that has already been taxed twice, we pay more taxes and if we try to spend it we once more pay vat, taxes and taxes and taxes. So how about this, you stop taxing corporations and small businesses completely and you tax the ones that make money from those, directors, CEOs, shareholders, owners, everyone, just like you do with normal employees.

That money the corporations hide from taxes is going to end up in someone's account sooner or later, it's not like Starbucks is buying a yacht, Apple is driving a Bugatti, and Coca-Cola is spending millions on hookers and booze. Shut down the deductible expenses and other small holes that could hinder this and then it's pretty simple. Is Apple sitting on a mountain of cash, good for them! The moment they will try to send it to people in the company tax it as it's normal.

And such a tax model would be far better for small businesses too.

You're ignoring competition with this. If StarBucks charges $4.15 for their "coffee" and makes about 30% profit, they earn $1.24. If they currently pay virtually no taxes and it goes up to 15%, they'll pay $0.19 more than they do now. If they raise their prices by $0.19, they'll sell less and the tax-paying small business next door sells a bit more.

One of the things I see people Not notice all the time when talking about corporations and taxes.


And this is very important.   

Corporations.   Never. Ever. Pay taxes.

Seems like a BS statement right?   Work with me a second.

Who buys stuff?  you me the person next door.   who sells stuff? those evil corps!  So when a corp charges you money for items/services whos actually paying again?  why its the Consumer. 

Corps Always, and I mean that Always pass on what ever tax governments charge them to the consumer.  Some larger corps actually back charge the gov Administration time to collect that tax for that gov.

So when you start talking about How much a corporation Needs to Pay for what ever you think some sort of envy/justice due to them making money and you aren't compared....

Stop Stabbing yourself in the foot for the Love Of God.  Its ALWAYS YOU paying those taxes, ALWAYS, 100% of the time.  its Never those corporations.  Its always You and You and You to Governments that tend to waste it. Gov will Always tell the story that somehow that corp isnt paying its fair share.   It never pays ever anyways.  no matter what the story is.

Remember that!

Taxes on multinational companies will not succeed unless there is a global effort to do so, and this effort will not be achieved unless by concerted efforts by many countries to impose a globally agreed minimum and stress on that, otherwise it will be considered an additional advantage for countries that are considered safe havens and an additional burden on the citizen being He is the one who pays the real price of the goods.

15% sounds good as many countries charge up to 17% tel taxes.

I live in a country with very high taxes. On wages, that is. I also live in a tax paradise. For multinationals, of course. I would love to see government spend a bit less, but they're not going to do that. Taxing rich corporations would be good, because I don't like how "capital" is taking more and more wealth away for "labor". I've seen examples in which Starbucks pays a fraction of a percent in taxes, while competing with the small business owner next door who's tax rate is hundreds of times higher. That's just not right.
I'm afraid though it won't help, and those corporations will just find the next loophole.

When it comes to income tax it's interesting to note that countries with the highest taxes are generally the nicest countries to live in (I'm not sure about the cause and effect though). See Highest Taxed Countries 2021: you'll find the lowest income tax in countries like Ghana, Mozambique and Iraq. The highest taxes in the list are paid in South Korea, Canada and Japan.
I do believe it would be better for most people if corporate taxes go up a bit, and income taxes go down a bit. I wish I could get in on this 15% tax deal.

Ireland’s tax agreements with multi-national companies have been ruled by the court’s to violate EU laws in the past, so Ireland I think is an outlier. 130 countries signed on, there is clearly broad international support. Ireland even agreed in principle, they just think 15% minimum is too high, but their entire pitch to multi-nationals is as a tax haven. If they join a minimum tax pact, there’s no real reason to HQ in Ireland anymore.

Ireland is a member of the European Union, so I don't think that Germany or any other EU nation can impose a "special tax" on imports from that country. That will go against one of the basic principles of the European Union. The desperation from the part of governments is understandable. Revenues are not increasing at a rate as per the expectation of the government. With every passing year, the general population is demanding more and more freebies. The income taxes are already sky high in countries such as Germany (up to 60% in some cases) and the VAT is also one of the highest in the world. Now the only option is to find new avenues, such as corporate tax.

The real problem with topics like this is basic education doesn't cover basic principles of taxation. The public doesn't know enough to legitimately say if tax hikes are good or bad policy. People have no idea if they're being taxed fairly or unfairly. Or which tax policies they should support to further their own self interests.

Supporters of global minimum tax rates don't know if they will improve their quality of life, give them more opportunities, create jobs. People who support this do so without a real motive. They have no idea why global tax rates are proposed or what the end goal behind them is.

There was an interesting argument made during Trump's Presidency where people complained Trump's tax hikes on china would be passed on to US consumers. The most basic question someone might ask on this is who pays for these tax hikes. What guarantee do people have that collected tax revenues will be used to benefit the people, rather than fund dubious wars or causes that the people taxed couldn't care less about.

Perhaps what I did not state clearly is that all companies are really owned by the same corporation that deflates the benefit in countries with high tax and re-inflates in low tax countries by setting the prices at the convenience. Other than that my basic example is very clear IMHO and it is easy to see how taxes are avoided by the corporate structure chosen. I cannot say much more.

Re why taxes on the manufacturing country, these have to be paid because the company that manufactures the product makes a profit, thus should pay tax as opposed to deflating artificially the price and benefit. It should be all about the real value added.

Re there is no pact - 130 countries do have a pact. Ireland will likely have fallout when negotiating other things in Europe due to their decision, as it was Europe not the US the main promoter of this.

RE other people speaking of bitcoin, think of this:

-  You buy bitcoin at 1000
- Bitcoin is now at 30000
- You sell your bitcoin to a company in a tax haven for 1000 a piece. OTC, so you can sell at whatever price you want. You have not made profit, thus no tax is applied to you.
- The company, which you own but you do not declare as yours, sells that bitcoin in a exchange for 30000.
- You don´t pay taxes, as the tax haven does not require you to do so.

Not sure it would work, but this is similar to what the big corps do. Except that it is legal for them but not for you (you have to declare off-shore earnings in most countries).

But what they are paying for the particular job is sad. The reason why these big companies are even investing in such Nations are because they are providing them with added benefits of cheap labor and instead of providing them benefits they seem to get on this corrupt train.

These companies can afford to pay the workers well, but they choose not to. Make them work twice as hard. But then again they are far better than anything else since during pandemic there are worse things to consider.

(( Remember what Kylie Jenner did , this was just an example how they treat them ))

First of all, OECD was an arrangement where issues relating to tax evasions are discussed. As mentioned above by me 15% tax rate is for double tax avoidance only. These companies also have created a law relating to Notified Jurisdictional Area(NJA), in this business which interact with companies in these areas like Panama are heavily taxed, basically, the amount of tax which would have been paid by companies in NJA is recovered from business in their own countries.

Secondly, I don't sometimes understand bitcoiners, on one hand, they want that bitcoin should not be taxed and therefore they would pay the least taxes to the government but on the other hand, they want Companies operating globally to pay the highest tax possible. Strange dubious behavior.

I believe that 15% is not even enough, that is just way too little. If a company still wants to handle their business in a shadowy nation, hide their wealth in panama or whatever then you have to punish them in an amount that has never seen before. Make it like 10 billion dollars for each nation they work in.

Just to give an example, lets say facebook is doing something shady and people like mark hiding their money in panama, in that assumption facebook is all over the world right? Make it 10 billion dollars for each nation they work with and it becomes nearly 150-200 billion dollars, in that case they will of course fail to pay that and it will be insanely hard to overcome that problem and continue to exist, they can still find a way but I can guarantee you that they will play nice after that and all the other nations will be afraid. The problem with big companies hiding their wealth is that no government does anything about it, give them something to fear and they will follow the rules like everyone else.

Kindly change the subject. It is OECD and not OCDE, which I believe you are aware too as you have written on OECD below.

The new radical changes that you are talking about forms part of new edition of Base Erosion and Profit Shifting (BEPS) which is known as BEPS 2.0. This includes the 2 pillars as below:
Pillar 1: Revising the nexus rules and profit allocation rules - This is mainly meant for revising the nexus of where digital services are consumed. Because determining the nexus of digital goods and services is what causes the highest confusion.

Pillar 2: Setting up of the new global minimum tax rules - Here the nexus in market jurisdictions should arise in which case the income would be taxable in the market jurisdiction. Here there is a distinction between countries that are developed countries(GDP more than 40B Euro) where the corporation should have at least 1M Euro in revenue and the same threshold is 250,000 Euro in underdeveloped countries.

Further, in your example, there is a bit of confusion: Just because an Irish corporation buys Iphones it will not be taxed in Ireland. The taxing rights stay with the country where the sale actually happened i.e. where the transfer of the risk/ownership of the goods actually took place. Of course the MNEs would structure the deal in such a way that it seems that the sale took place in a low tax jurisdiction. But Tax treaties provide that if the intention of the transaction was only to avoid taxes, then corporations can be taxed in the other state (the one selling goods) as well. But it is inaction of the government/tax offices to actually chase these corporations that is the issue.

Also the new minimum tax rules under Pillar 2 is supposed to stop these MNEs from avoiding a lot of taxes and could finally bring parity in taxing of large MNEs and smaller corporations.

These inconsistencies in the economy are opening the opportunity for others in the markets. Taking as an example the iPhone phone that its biggest competitors tend to offer cheaper phones like Xiaomi, Samsung, Huawei among others.

Not everything is bad, despite everything the global economy benefits by opening jobs to meet the demands.

I think you are mistaken in two aspects. One is that the 15% tax rate is basically created for Double tax avoidance agreements. This means when a foreign company operates in a country it will either pay the tax at the rate specified in that country or the rate of DTAA whichever is lower, This is done to avoid the problem of double taxation because the same income used to get doubly taxed in both the source country and the home country, this practice actually made a lot of companies set up their head offices in Off-shore tax-free Islands. This is why OECD decided to give this thing a nod.

Secondly talking about the iPhone thing. Can you please refer to the source of your calculation? Because if you manufacture in India or China you surely pay the VAT or the GST, even if I assume that on exports it can be rebated but in Income tax, there is a section of transfer pricing which means the margins on your products should always be adequate to ensure that you don't transfer profits into a lower tax country. This section can be invoked here for sure.

As George Turner, Executive Director of TaxWatch, puts it, "we're going to see that what's more risky is tax havens like Bermuda, where they can afford not to pay taxes".
the global corporate tax consensus no longer sees a tax haven, as the G7 has suggested that the 15% tax levied on every major corporation will not change their base under global consensus.

while José Castaneda has high hopes for every major country to continue to encourage and provide full support for this international tax rule. thus making a kind of balanced agreement between the tax application system regulations.

and if the deal is not done, then many companies are quite worried, where they get a discount of 10 to 30%.

as head of aviation finance at KPMG Joe O'Mara continues to ensure that industries such as aircraft leasing will remain on the defensive without evading taxes every year.

First, there was no pact, Ireland didn't agree to it, so the rest can get that 15% and stick it where it belongs.
Second it not about every country having the same tax as Ireland but more on Ireland raising its tax to other countries levels.


Why should any tax be paid in the manufacturing country?
You made a product worth 25$, here is 25$, goodbye!
I bought something worth 25$, it's my business to whom I sell it and how much and where this happens, my money my product!
If I sell you my car and I make 2000$ on top of what I bought it a year ago should I pay 10% to the German government because it was manufactured there?

On every country having the same tax as Ireland, that is kind of what happened with the pact. Except that some countries won´t accept it, thus leaving room open.

On the manufacturing on poor or rich countries, that is unrelated to tax, as the price of the iPhone is unrelated to its real production cost. I am not saying that it should be manufactured in one place or another at all. The example is how the tax that should be paid in the manufacturing country and then in the destination country gets avoided by stating most of the profit as made in a third country that does nothing but has low tax.

I have a far better solution. Why not change the tax in all countries to that of Ireland?
Doesn't it make far more sense, companies would not have to go through all this, you won't have a lot of guys chasing them down and products would be much cheaper for everyone ? Of course, the governments would have to cut their spending and they will not have that much leverage when trying to bribe voters with claims that they are fighting the evil corporations and they are spending all their blood on these battles, but I could live with that.

Taxes, taxes and taxes...
All those governments have one single plan, tax the hell out of everything and try to hand as many freebies as they can to buy some votes, it doesn't matter than long term you're ruining your economy, it matters that you get the 51% necessary so you're set for 4 years.


You're looking at it from the wrong point of view.
If there would be no rich countries to pay 250$ for that phone the poor manufacturing countries would be out of a job!
Try to sell that for 200$ right from the factory and let's see what happens, in one month the factory is in another country.

As you mentioned, I think the biggest problem with this agreement is to exacerbate the imbalance between developed and developing countries.

As you mentioned, the iPhone is manufactured in China or India, and the cost is only $25, and the tax to be paid is 0.3 cents. The Irish company bought the iPhone and paid $1 in taxes. In the end, the iPhone was sold in Germany at a tax rate of approximately $20.

Obviously, the developed countries get more profits, while the manufacturing-based developing countries can only get a small return. I think it will also accentuate the inequalities between rich and poor countries. And 60% of the minimum tax revenue will be reaped by G7 countries. Developing countries, which represent more than a third of the world's population, are expected to receive only 3% of the revenue. (Quote from Parrinello）

Does 15% sound like too much. Certainly not, most countries, even Ireland and perhaps except tax havens, have a higher official tax than 15%. It is a step in the right direction, however:

- The problem is rarely the minimum tax, but rather the private deals of governments with large corporations to lower this to, sometimes, near zero taxes.
- Countries that are less attractive for investments cannot lower their taxes. This equates to having to sell your oranges at 50 cents a pound no matter if they are ripe, large, small, juicy or dry.
- Since not all countries participate, this does not address the problem of corporations setting shadow structures on these.

One of the key points however is the intent of the states to charge tax where goods are consumed. This is obviously aimed at Google, Facebook, Amazon, Netflix and the like, who, until now were declaring the profits where they choose. This would look as simple as this:

- An iPhone is manufactured in China or India. It costs 25 USD.
- This iPhone is sold to a company in a lox tax country. The iPhone is sold for 25 USD and one cent. One cent of profit is taxed in China or India at (e.g.) 30%. They pay .3 cents of taxes.
- An Irish corporation buys the iPhone for 200 USD. This is taxed at the low tax countries profit tax (e.g. 1%, so they pay 2 USD there)
- The iPhone is now in the European Union, it travels freely to Germany where it is sold at 210 USD. This profit is taxed in Ireland at 10% (thanks to an special agreement). That is 1 USD of tax.
- VAT is applied at 20%, that is around 40 USD. That´s paid in Germany.

Apart from VAT, The real tax at that 15% minimum if you do not do all this tax avoidance is (210 - 20) *15%, plus VAT.

Excluding VAT, the tax should have been 28.5 USD and they have managed to pay 3.3 USD. This is a very basic example and figures are probably far from accurate, but you get the idea. A solution has to address this pick and choose of where to pay.