Need for a Global Corporate tax?
1. Post
Digitalisation and globalization, the existing global tax rules have become
outdated to optimally tax Multinational Enterprises their 'excess profits' and
prevent them from booking their profits in low-tax countries across the globe.
2. Therefore, a
landmark reform to the international tax system becomes demanding.
Global Minimum Corporate Taxation in Detail:
1. Consequently,
the OECD/ G20 Inclusive Framework came up with ‘October 2021 Statement'
2. It is a
two-Pillar Solution
Pillar 1: Partial re-allocation of taxing rights, and
Pillar 2, the minimum level of taxation of profits of
multinational enterprises
3. The intent is
to bring fairness, transparency and stability to the international corporate
tax framework
4. Pillar 2
exemptions provided to,
Government entities, International or non-profit
organizations, Pension funds or investment funds that are parent entities of a
multinational group.
5. 2021 deal - A minimum 15% tax on large global firms + additional 25% tax on 'excess profits' as defined by OECD.
6. Global corporations with annual revenues over $22billion with profits more than 10% annual growth, it shall be considered excess profits; the 25% additional tax shall be divided among countries.
