The agreement reached by the finance ministers of the world’s largest industrial powers on a 15% minimum corporate tax rate, and where to tax multinationals’ profits, is being questioned by critics, who argue that the rate is too low, and that a loophole could allow Amazon to evade the tax.
- Critics noted that the finance ministers agreed that “only global firms with a 10% profit margin” would have to pay some corporate tax in the countries in which they operate (as opposed to countries where they are based.) But technology giant Amazon’s retail arm booked profit under that threshold.
- The 15% rate has also been criticized as too low, especially compared with the U.S. administration’s initial proposal of 21%.
- It may, however, prove crucial to clinch the agreement of countries such as Ireland, with its current 12.5% corporate tax rate. Ireland’s finance minister said it would stand to lose some €2 billion ($2.4 billion) in revenue if an international agreement is struck.
The outlook: The G-20, which includes Russia and China, is the next step on the road to a global agreement, without which the G-7 deal is dead in the water. Concessions may have to be made on the way to conclude a definitive treaty, with all the 139 countries currently participating in negotiations on the matter within the Organization for Economic Cooperation and Development.
Expect loopholes to be carved out, definitions and perimeters to shift, and maybe numbers, and even the tax rate itself, to be modified on the way to a deal that has to be global to be efficient.