G7 reaches global corporate tax agreement
G7 finance ministers agree on corporate tax reforms The deal was announced this weekend. According to PNR housing economist Hon de Jong, a lot of negotiations have taken place and the deal reached now is a milestone.
The main two components
The two main elements of the agreement are the global minimum corporate tax rate of 15%, and large companies pay taxes in turnover-producing countries. Currently, this should only be done in the country where a physical institution is located. According to De Jong, the minimum corporate tax rate is what the United States wants. “Americans are losing a lot of tax revenue right now because American companies are dropping their profits in countries with very low corporate taxes.” Europe was annoyed by the big tech companies that generate revenue in the countries, but do not pay profit tax there because the physical establishment is in another country. With the new deal, that too is a thing of the past.
According to De Jong, many more steps need to be taken before the new projects can actually be implemented. The G20 will meet in July. This includes key countries such as India and China, which are not in the G7 that have put forward the plan. It is unknown at this time what he will do after leaving the post. According to De Jong, contracts are mainly for the benefit of large countries and less for smaller countries. ‘It remains to be seen whether those small nations will object.’
Implications of the Netherlands
It is not yet fully clear what this plan means for the Netherlands, which is internationally known as a tax haven with letterbox companies. The outgoing Secretary of State, Hans Wijelpreef, said he supported the initiative and was committed to dealing with the tax. However, De Zhang comments that tax benefits for smaller countries are actually a tool to compete with larger countries. ‘Of course it has to be kept within range.’
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