OECD: global minimum tax revenue uncertain
A Financial Times article on just published research by the Organisation for Economic Co-operation and Development places Ireland and Netherlands as “the big winners from the global minimum tax”, but estimated that “investment hubs” like Bermuda “would have the largest expected gains from the reforms.”
However, Manal Corwin, head of tax at the OECD said that while there may be short term gains for investment hubs, the global minimum tax will reduce the incentive to establish “costly” structures in tax-advantaged locations.
The research identified the other investment hubs as the British Virgin Islands, Ireland, Jersey, Guernsey, Luxembourg, Netherlands, Switzerland and Singapore.
Meanwhile, Reuters reported that the landmark 2021 deal among 140 countries, has the global minimum tax rate going live this year with 36 countries already introducing laws setting a 15 per cent floor on corporate taxation.
The FT article quoted the report as saying the predictions about how much additional revenue tax havens would receive involved ”a higher degree of uncertainty” than other results.
The OECD has led the initiative, believing the measure will reduce the difference between corporate income tax rates in tax havens and other countries from 14 per cent to 7 per cent.
According to Reuters, the OECD said in an update of its estimated economic impact that as a result, “where multinationals invest abroad is likely to be increasingly driven by such things as workforce education and infrastructure rather than which location can reduce their overall tax bill”.
David Bradbury, deputy head of tax at the OECD, was quoted: “The global minimum tax reduces profit shifting incentives and in doing so, it improves the allocation of capital by increasing the importance of non-tax factors.”
Some researchers are unconvinced that all tax havens can gain equally from the reforms.
One predicted that countries such as Ireland and the Netherlands, where multinationals had booked large amounts of profits and also had a large economic presence, would likely benefit the most from the changes.
According to the research, high-income jurisdictions, such as Australia, Germany, Japan and the UK would receive the second-highest amount in additional revenue of some 7 per cent to 10 per cent.
The FT quotes one of the report’s authors that all participating countries would receive gains of at least 3 per cent.
Still, the OECD has reduced the additional tax it projects will be gained from the global minimum tax.
FT said: “Last year, this was projected to be up to $220 billion. The OECD now estimates it will range from $155 billion to $192 billion annually. It said the revision was because of a change to its modelling which relied on more up-to-date data.”
• For the OECD Taxation Working Papers No. 68, see Related Media
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