By Divya Chowdhury
April 15 (Reuters) – The final deal for a global minimum tax rate among G20 countries could likely be around 15%, a compromise between Ireland’s current rate of 12.5% and the 21% proposed by the United States, said a global tax expert. Thursday.
U.S. Treasury Secretary Janet Yellen backed the U.S. government for a global minimum corporate tax rate, possibly paving the way for a long-awaited deal updating international tax rules for the first time for a generation.
Daniel Bunn, vice president of global projects at the Washington DC-based Tax Foundation, said it was not clear whether such a tax would be prescriptive or binding, and that it was possible for countries to have tax rates. Separate national taxation for purely local businesses that be lower than the overall minimum tax rate.
This means that “multinationals (companies), simply because they operate across borders, will face a greater tax burden,” Bunn told the Reuters Global Markets Forum.
President Joe Biden’s administration wants to raise the corporate tax rate in the United States to 28%, so it has proposed an overall minimum of 21%.
“The minimum rate of 21% will be too high to get agreement either in a purely US legislative context or at the OECD (Organization for Economic Co-operation and Development) / G20 (level),” Bunn said.
The average corporate tax of the 37 richest countries in the OECD group is 23%.
Bunn also said the US Congress could increase the domestic corporate tax rate to around 25% and the low-tax intangible global income, or GILTI, to around 16%, “which is already slated to increase.”
GILTI, a provision of former President Donald Trump’s tax overhaul, imposes an effective tax rate of 10.5% on income from tax havens, intended to discourage multinational corporations from avoiding US taxes by holding intangible assets such as overseas software patents in low tax countries, and is half the current national corporate tax rate.
“It is not clear where all the political negotiations will lead,” Bunn said.
“It is possible that there will still be some variety of ‘minimum taxes’ when this is all settled, rather than a single form of overall minimum tax,” he added. (This interview was conducted in the Reuters Global Markets Forum, a chat room hosted on the Refinitiv Messenger platform. Register here to join GMF: https://refini.tv/33uoFoQ) (Reporting by Divya Chowdhury at Mumbai; Editing by Steve Orlofsky)