The G20 has given the greenlight for the adoption of a Global Minimum Taxation of at least 15% by 2023. Determined to eliminate tax evasion, both the United States and the European Union have backed the adoption of a worldwide taxation system that has been approved by 130 countries and that will now force multinationals to pay taxes in countries in which they operate. Global giants in the likes of Google, Amazon, Facebook and Apple who make above the $889 million threshold per year will now have to pay taxes in countries in which their goods and services are being sold, even if they have no physical presence there.
This taxation system will generate an additional $150 billion of global tax revenue per year according to the Organisation for Economic Co-operation and Development.
The stakes are high for the United States Federal Government. President Biden who has personally lobbied for this new shift in taxing rights has tied this project to his own domestic proposal to raise corporate tax rate in the United States from 21% to 28%. A Global Minimum Taxation should dissuade US companies to move to tax havens once the 28% rate is applied.
The United States and France have made it clear that they want this Global Minimum Tax to be above 15%. Following the G20 meeting in Venice on Saturday, the French Finance Minister, Bruno Le Maire stated that “France is going to advocate for a global minimum corporate tax of higher than 15%, because this is the first time that we can really put an end to the race to the bottom that we have observed so far in international taxation”.
France’s corporate tax rate is currently one of the highest in Europe, at 33.5%.
Ireland that has a nominal tax rate of 12.5% has not agreed to sign the agreement yet.
In Mauritius, the nominal tax rate is already at 15% but there are various incentives where companies in specific sectors can pay an effective tax of less than 15%. With the GMT, companies operating in the Mauritian outsourcing and offshore sectors could find themselves paying taxes in two jurisdictions, if their effective tax in Mauritius is less than 15%. However, the GMT will also mean additional income for the Mauritian Government as it will now find itself on an equal foothold with other jurisdictions in the region such as Dubai.
