Back in October, the Organisation for Economic Cooperation and Development unveiled a new tax plan that was signed by 136 countries around the world and is scheduled to become effective in 2023.
The OECD spearheaded a global minimum tax rate that would make it harder for companies and individuals to establish what’s known as tax havens, or offshore financial centers, where personal or business accounts are kept in countries with zero to little tax rates for foreigners.
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The initiative was formally endorsed by Group of 20 nations, an intergovernmental forum comprised of 19 countries and the European Union, at a summit in Rome, Italy on Oct. 30.
It’s not an illegal activity if an individual or business reports the activity and doesn’t use it as a means to evade tax obligations, but it’s an issue the OECD wants to curtail.
Here are facts and figures of the OECD’s plan, and what it hopes to achieve, according to World Economic Forum.
- A minimum tax rate of 15% would go into effect for companies that have profits of at least $868 million.
- The tax is estimated to generate $150 billion in additional global tax revenues each year, according to the OECD.
- The countries that are on board with the tax account for 90% of the global economy.
- Four countries -- Kenya, Nigeria, Pakistan and Sri Lanka -- did not sign with the agreement.
There are some roadblocks to fully implementing the new tax by 2023, according to Bloomberg Tax:
- Participating countries, including the United States, have to bring their own tax laws and policies in alignment with the new global minimum.
- All participating countries need to act quickly in order to implement the tax on a short timetable.
- Countries might start looking for exemptions for certain sectors, such as banking, insurance and extractive industries.
What are your thoughts on a global minimum tax, and will it work? Let us know in the comments below.