The winners are industrialized countries with many corporate headquarters. Poor countries feel little about the new ‘equity’.
The global minimum tax has always been the biggest fan of the large industrial countries. German Chancellor Olaf Schulz’s candidate promised last summer, when he was finance minister, that a minimum tax would make the world fairer. Fellow American Janet Yellen was delighted that the “devastating tax dumping race” was approaching and that no one could win.
Now the minimum tax, which was decided by 136 countries under the umbrella of the Organization of Industrialized Countries OECD, is almost reaching the target. For the first time, a team of researchers has calculated the real winners of the 15 percent minimum tax that large multinational corporations will soon have to pay.
First place: the United States of America, with a value of 57 billion dollars
Economist Mona Barak of the EU Tax Observatory, an independent research team funded by EU funds, will collect the highest additional tax revenue from those countries where the most profitable companies are headquartered.
The major industrial countries are the ones that benefit the most. Above all is the United States of America, where nearly a third of multinational corporations are located. The EU Tax Monitor estimates that the minimum tax will bring in just $57 billion a year in additional tax revenue.
In addition to 80 billion euros for the European Union
The European Union can hope for a total additional income of 80 billion euros. Germany alone is responsible for ten billion of this. It would be roughly a fifth more than what Germany now collects in corporate tax. Far fewer emerging countries such as China – which is worth more than six billion euros – or South Africa or Brazil will be looking forward.
As a basis for their calculations, researchers from the European Union Tax Observatory looked at where the 2,000 largest companies worldwide have their headquarters. They made their calculations based on the latest available country data from 2017.
How fair is the reform really?
Economist Mona Barak sees the poorest developing countries as the loser of reform: “You probably won’t get anything from the minimum tax pie. Simply because we haven’t found a single global company based in these countries.”
When asked if corporate tax reform – as he has promised – will bring more equity in global corporate taxation, tax expert Barak said: That’s not an easy answer. On the other hand, minimum taxes reduce regressive tax competition between low-tax countries and high-tax countries. This is more fair than before.
On the other hand, the poorest countries will have absolutely nothing of the extra income expected. And emerging countries such as China only a little. This is not very fair
Too many exceptions
The research team also criticizes the fact that the fix allows many exceptions, especially in the beginning. Without these exceptions, the minimum tax revenue could be about a quarter higher. The minimum tax must be due from 2023.
Tax expert Baraké can’t yet say what that means for Switzerland’s low-tax country. It depends on how Switzerland and Switzerland-based companies respond to the minimum tax. What is certain, however, is that the clear winners of the minimum tax are the big states. In other words, those who pushed reform the most vigorously.
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