Home 9 Taxation 9 What is the hypocritical global minimum tax and how does it affect you?

What is the hypocritical global minimum tax and how does it affect you?

by | Nov 11, 2021 9:01

Image: unsplash.com

By endorsing a worldwide minimum tax rate of 15% on enormous multinational earnings, the leaders of the world’s largest economies accomplished a pact that has subsequently gathered traction and pledges from leaders in 136 countries.

The deal’s goals are straightforward. It establishes a tax cartel, which high-tax countries believe will reduce competition from countries with lower and simpler taxes. It also advantages wealthier, higher-tax countries by moving earnings from countries where businesses are headquartered to countries where they sell their products. 

The following are the basics on a global minimum tax: Most countries utilize a “territorial” system, including the United States since the adoption of the Tax Cuts and Jobs Act in 2017. Territoriality is a fundamental premise of sound fiscal policy, implying that governments do not tax their citizens’ foreign-earned income. Instead, the foreign authorities where the money is earned tax it. Companies can decide where to do business based on which country has the most favorable tax environment. This strategy puts pressure on countries with harsh tax policies to relax them.

High-tax countries dislike this rivalry, which is why they’ve been clamoring for a global minimum tax for the past decade. While the new regime will help the US government greatly, it will not benefit US enterprises with foreign subsidiaries and income.

The intriguing thing is that some proponents don’t hide the fact that their purpose is to simply take more money from corporations. Lawrence Summers, an economist and former Treasury Secretary, praised the new accord in a recent Washington Post article:

“Countries have come together to make sure that the global economy can create widely shared prosperity, rather than lower tax burdens for those at the top. By providing a more durable and robust revenue base, the new minimum tax will help pay for the sorts of public investments that are fundamental to economic success in all countries.”

Source: weirtondailytimes.com

Related Posts

Remote Workers and Global Tax Compliance

Remote Workers and Global Tax Compliance

Remote work is the practice of working outside a traditional office environment. With advancements in technology, individuals can now perform their job duties from their homes, co-working spaces, or even while travelling. Remote work offers a multitude of benefits,...

New expat regime for inbound taxpayers and researchers, in Belgium

New expat regime for inbound taxpayers and researchers, in Belgium

From January 1, 2022, a new Belgian expat regime for inbound taxpayers and researchers is active. There is a tax-free reimbursement of 30% of the gross taxable pay for expats, similar to the Dutch 30% tax rule regime. Furthermore, the Belgian expat rule may appear to...

The Golden Visa Programme in Madeira

The Golden Visa Programme in Madeira

In January and February 2022, the investment raised through golden visas in Madeira was around €2 million. In total, four Residence Permits for Investment Activity (ARI) were granted in the autonomous region. In the first month of the year, three ARIs were granted to...

EU fiscal rules reform ideas from Spain and Netherlands

EU fiscal rules reform ideas from Spain and Netherlands

Spain and Netherlands, through their finance ministers, call for a reform of EU fiscal rules that would “reinforce fiscal sustainability in a more effective and efficient manner” and enable the public investments that are needed to implement the green and digital...

Taxation of Virtual Digital Assets in India

Taxation of Virtual Digital Assets in India

Taxation of Virtual Digital Assets in India: It is a widely acknowledged fact that cryptocurrency trading has increased dramatically in recent years. People use digital assets such as NFT (non-fungible token) for using cryptocurrencies such as Ethereum, Bitcoin,...

So far, tax season has “no unexpected problems”

So far, tax season has “no unexpected problems”

With tax season less than a month away, what was expected to be a difficult filing season for the IRS has gone better than expected — so far. The IRS processed 5.9 percent more returns at the end of the second week of March compared to the same time last year, despite...

Where Can You Find the Lowest Taxes in Canada?

Where Can You Find the Lowest Taxes in Canada?

Taxes in Canada explained: The top marginal tax rates are the lowest in Saskatchewan and Manitoba, but the highest in the Northwest Territories and Nunavut. Where Is There No Tax in Canada? Territorial sales taxes are not levied in territories such as Yukon, Northwest...

How to live the expat life in Israel

How to live the expat life in Israel

If you're wondering how to relocate to Israel, we've got you covered with everything you'll need, from finding housing to set up utilities. But how difficult is it to settle in Israel? Foreigners, in fact, may find it extremely difficult, unless they are Jewish and...

How do I trade in Cyprus as a person or a company?

How do I trade in Cyprus as a person or a company?

In this short article, we will demonstrate to you the best route to trade in Cyprus as a person or company. We take into consideration tax savings and of course the legal protection of the owner of the Company. 1. Legal Protection Like all things in life, cheaper does...

The IRS has updated its FAQs about FFCRA tax credits

The IRS has updated its FAQs about FFCRA tax credits

The IRS has updated its frequently asked questions (FAQs) on tax credits for paid leave under the Families First Coronavirus Response Act (FFCRA) for leave beginning before April 1, 2021. The FFCRA initially qualified covered employers for dollar-for-dollar tax...