The G-20 group of nations is set to seek an agreement on a global minimum tax rate by mid-2021, according to recent reports. The aim of this agreement is to prevent multinational corporations from using tax havens to avoid paying their fair share of taxes.
The proposal calls for an international tax reform that will establish a minimum tax rate for all countries, with the aim of putting an end to the practice of allowing companies to lower their tax bills by booking profits in low-tax countries. This move is seen as an important step towards creating a fairer and more equitable global tax system, and could have far-reaching consequences for businesses and governments around the world.
Currently, many multinational corporations take advantage of tax havens to reduce their tax bills, allowing them to pay significantly lower rates of taxation than they would otherwise be required to pay in the countries where they operate. This has resulted in billions of dollars in lost revenue for governments worldwide, which has led to a growing sense of frustration and anger among taxpayers.
The G-20 countries, which account for more than 80% of the global economy, have been discussing the issue of global tax reform for several years. However, progress has been slow due to disagreements over key issues like the scope of the reforms and the level of the minimum tax rate.
The proposal for a global minimum tax rate has gained momentum in recent months, with the United States and several other countries expressing their support for the initiative. The Biden administration has proposed a minimum tax rate of 21% for US companies operating overseas, which would align with the G-20 proposal.
Proponents of the proposal argue that a global minimum tax rate would help to level the playing field for businesses operating in different countries, while also providing governments with much-needed revenue to invest in public services like healthcare, education, and infrastructure.
Critics of the proposal, however, argue that it would limit the ability of countries to offer tax incentives to attract investment and could lead to a race to the bottom in terms of tax rates, with countries vying to offer the lowest rates in order to attract businesses.
Overall, the proposal for a global minimum tax rate is a significant development in the ongoing debate over international tax reform. While there are still many issues to be worked out, the fact that the G-20 countries are actively seeking agreement on the issue is a positive sign that progress is being made towards creating a fairer and more equitable global tax system.