Multinationals to pay 10% more under reform plan, IMF says
A global minimum corporate tax rate could increase the effective tax rates paid by multinational companies by up to 10 percent, a study by the International Monetary Fund (IMF) found.
In a new report, the Washington-based fund called proposals for a new global minimum rate of 15% agreed by G7 finance ministers over the weekend “historic” and an important step forward on the road. corporate tax reform.
He said a minimum rate would help reverse nearly four decades of declining corporate tax rates around the world while “mobilizing income” for cash-strapped countries in the wake of the pandemic.
Using tax revenue statistics and company-level data, he calculated that the introduction of a minimum tax would increase the average effective tax rate – the rate actually paid by corporations after taking into account tax breaks – around 10% compared to profits.
The agreement reached by the G7 finance ministers gave new impetus to the overhaul of international tax rules.
The Organization for Economic Co-operation and Development (OECD) has proposed a global minimum corporate tax that would apply to the profits of multinational companies.
Countries would still set their own local tax rates, but if a multinational company paid less than the overall minimum rate in another country, the jurisdiction of origin or origin of that company could supplement its tax payable for itself. ensure that she pays the minimum.
Finance Minister Paschal Donohoe said the Republic could lose up to a fifth of its overall corporate tax revenue if the proposals are passed.
In its report, the IMF said: “There is unusual tension in the world of corporate taxation. On the one hand, countries compete vigorously to attract businesses and investors within their borders by offering numerous tax incentives based on profits and costs, lowering their tax rates.
“On the other hand, governments blame these multinational companies – once they have been successfully lured into the country – for not paying their fair share of corporate taxes, leaving the burden on local businesses. often in difficulty, ”he said.
While welcoming the new proposals, he said tax incentives to attract multinationals would likely persist even after the introduction of a global minimum tax, as countries will continue to do what they can to attract foreign investment for growth and development.
“But the value of these incentives will decrease, because multinationals will only be able to reduce their liabilities to 15% and not to zero,” he said.
The Department of Finance, meanwhile, said it would examine in more detail the likely impact of the proposed tax reforms on the corporate tax base in Ireland when “there is greater visibility on the detailed rules underpinning any OECD agreement ”.
“The OECD’s proposals to reform international tax rules include a number of complex dimensions and moving parts, and it is essential to note that an agreement has not yet been reached on them,” a- he declared.
“The ministry previously estimated that the cost to the public purse of OECD reforms could reach 2 billion euros per year, and this is the estimate that we included in the published stability program update. by the ministry in April to apply from 2025, “he said. added.