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Wan LixinOpinion deputy editor of Shanghai Daily
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Long way to go for global MNC tax
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After the accolades, an agreement among the world’s wealthiest countries to set a global minimum tax on the biggest companies now faces a long, bumpy road to implementation.
The path is complicated even among the Group of Seven rich nations that endorsed the plan, with United States President Joe Biden having to convince recalcitrant members of Congress.
In recent years countries have previously clashed over taxing the overseas profits of big companies, especially US tech giants.
But the mood has changed as governments look for new sources of revenue after spending huge sums to protect their economies during the coronavirus crisis.
The agreement between the US and its G7 partners Britain, France, Japan, Italy, Germany and Canada in London at the weekend is only the first step in a long process.
“There is still quite a long road to go,” said Elke Asen, a policy analyst at the Tax Foundation think tank in Washington.
The reform now goes to finance ministers of the Group of 20 developed and emerging countries at a July meeting.
The “more difficult part,” Asen said, will be the next step: Negotiations between 139 nations under the aegis of the Organization for Economic Cooperation and Development.
“I think we’re probably looking at a few years here before it’s actually finally implemented,” she said.
A source close to the negotiations said the G7 agreement “is a very important first step but there is still a lot of work to do to get” a G20 agreement and a majority of 139 countries to back the plan.
The reform has two “pillars.”
The first would allow countries to tax a share of the profits of the 100 most profitable companies — such as Facebook or Google — in the world, regardless of where they are based.
The second pillar is a global minimum corporate tax of “at least” 15 percent, which aims to stop competition between countries to attract multinationals by offering them extremely low rates.
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