Global Minimum Corporate Tax

Finance Ministers of G 7 nations signed a landmark agreement for the imposition of a global minimum corporate tax rate of at least 15% at the G 7 Leaders' Summit held from 11-13 June, 2021 in the United Kingdom.

• It aims to generate tax revenue for the governments by discouraging practices such as Base erosion and Profit shifting.

Issue of Tax Avoidance

• It is estimated that 90 per cent of the world’s top 200 companies have a presence in tax havens and they pay taxes not at the place of economic activities, but at the tax havens where they are registered. Example: A company might earn its profits from its business in India but it would pay tax on its profits in the Tax Haven country where it is registered.
• According to State of Tax Justice 2020, published by the Tax Justice Network, due to tax havens, $427 billion tax is lost each year globally.

Significance of Global Minimum Corporate Tax

• With the help of international collaborations, governments will be able to protect their Tax sovereignty by deciding the tax policy. It would also generate revenue to fund crucial development projects, especially during the COVID slowdown. It is estimated that countries will generate $150 billion as additional revenue.