Latest news with #globaltax
Yahoo
2 days ago
- Business
- Yahoo
Four years after a 15% global minimum tax deal, the world remains divided on how to implement it
In October 2021, 136 countries agreed to establish new tax rules requiring large multinational companies to pay at least 15% in corporate tax. Nearly four years later, this ambitious agreement is finally being implemented around the world, but its success faces big challenges. The Organisation for Economic Cooperation and Development (OECD) tax framework aims to end the so-called race to the bottom, where corporations pit countries against each other to pay less tax and shift profits to jurisdictions with lower tax rates. In the second part of The 15% solution from The Conversation Weekly podcast, we examine progress towards implementing the global tax deal. The OECD's two-pillar system fundamentally changes how multinationals are taxed. Pillar One determines where companies pay taxes. Pillar Two establishes how much they must pay: a minimum of 15% for any multinational with yearly revenues above US$850 million. The innovative aspect of the system is that it is self-enforcing. If a company pays less than 15% in any country, other nations where it operates can charge a supplementary tax to meet that minimum. However, implementation faces significant obstacles. So far around 140 countries have signed up. President Donald Trump withdrew the US from the negotiations in February 2025. China supports the framework in theory but is slow to fully implement it. And some low- and middle-income countries have also not signed up, citing technical complexity or bias toward higher-income countries. Martin Hearson, a research fellow at the Institute of Development Studies in the UK, explains that for countries with fewer legal and administrative resources, even good rules can be counterproductive due to their complexity. This has led some countries to look for alternatives, including a new UN Framework Convention on International Tax Cooperation, for which negotiations began in February 2025. Despite these challenges, the OECD expects that approximately 80% of profits previously taxed at low rates will now be appropriately taxed. Listen to part two of The 15% solution on The Conversation Weekly podcast. Part one is available here. This episode of The Conversation Weekly was written and produced by Mend Mariwany. Gemma Ware is the executive producer. Mixing and sound design by Eloise Stevens and theme music by Neeta Sarl. Newsclips in this episode from DW News, Arirang News, and Bloomberg. Listen to The Conversation Weekly via any of the apps listed above, download it directly via our RSS feed or find out how else to listen here. A transcript of this episode is available on Apple Podcasts. This article is republished from The Conversation under a Creative Commons license. Read the original article. Martin Hearson's research has been supported by the UK Foreign, Commonwealth and Development Office, the Norwegian Agency for Development Cooperation, the Gates Foundation, the Intergovernmental Group of 24, the World Bank, the UN Department for Economic and Social Affairs, and ActionAid International.
Forbes
19-05-2025
- Business
- Forbes
Bracing for Change and Uncertainty: A New Era for Tax Policy
You wanted interesting times? You got them. With global tax and trade policies now entering implementation stage, Deloitte's newly published report – Shaping the Path Forward – offers timely insights to help decision-makers navigate their way through a period of change and uncertainty. Gathering insights from over 1,100 tax and finance executives across various industries and geographies, the report identifies how these leaders are navigating the paths that lie ahead for global tax. Discussions of international tax reform have been focused on the Organization for Economic Cooperation and Development (OECD)'s Inclusive Framework Two Pillar approach to combating corporate tax base erosion since its emergence in 2021. The 2025 Global Tax Policy Survey reveals that companies are divided in their views about the impact of Pillar Two, particularly when it comes to how it will change the level of tax they will face, and the degree of complexity they will have to deal with. According to the survey results, opinion is divided fairly equally between those expecting to pay marginally more tax (47%) and those expecting to pay meaningfully more (45%) under Pillar Two. And only 5% expect no change on the amount of tax they would have to pay. The Survey found a similar picture on complexity, with 43% expecting more complexity overall and 47% expecting a mix of increased and reduced complexity. Again, only a tiny minority expect no change. Some of this uncertainty is coming from familiar sources, and some from new developments. It will likely take some time for this situation to stabilize and for a settled future path to emerge. Businesses have identified Transparency and Reporting as the most significant policy theme impacting them for the second consecutive year. The Survey reveals a strong expectation that levels of public transparency reporting will continue to increase, driven by a mix of regulatory requirements (including those coming from environmental, social and governance (ESG) sources) and voluntary disclosures (designed to ensure that publicly available data is adequately contextualized). None of this comes at zero-cost, with the burdens being endured by business. What stands out in this year's Survey is the extent to which respondents' concerns about their capacity to execute transparency strategies have eased somewhat compared to last year. Concerns are starting to subside across a range of issues, including aligning governance with messaging, sourcing and verifying data, assessing strategic risks and opportunities, and understanding requirements and standards. With businesses getting ahead of the mechanics of transparency, there is now a need for policymakers to find ways of reducing the burdens currently attached to the transparency requirements, so that the benefits of transparency can be delivered more affordably. There are already positive moves in this direction, but more is needed[1]. Digitalization is seen by survey respondents, for the second year running, as the second most impactful theme. This is an area where change and challenge go hand in hand; the digitalization of tax is expected to happen, but likely at a slower pace than anticipated. It is, therefore, significant that the responses to the 2025 Survey show little overt optimism among respondents. This comes through in a number of ways. First, expectations that the digitalization of tax administration – as exemplified by the OECD's Tax Administration 3.0 model – will simplify matters are lower than those expressed last year. Second, fewer than half of respondents see developments like e-invoicing leading to simplification. Finally, the perceived benefits of greater AI use in tax compliance are somewhat diffuse, and while around a third of respondents expect to see improved accuracy, fewer than a fifth expect the use of AI in tax to free up time and resources to focus on core business functions. Given the centrality of digitalization to the future of tax, it is important that this ambivalence is addressed. For businesses, the priority should be on ensuring that policymakers fully understand and respond to the sources of doubt and reticence. Like Transparency and Reporting, the Sustainability theme is both a source of challenge but also of stability, driven by familiar taxing models (such as carbon taxes and taxes on energy consumption) and established processes (such as the Carbon Border Adjustment Mechanism) that businesses are implementing. A stand-out finding from the 2025 Survey is that only a minority of business (just over a third) report that they are fully utilizing the range of grants and incentives at scale that are available to offset the costs of environmental-driven investments. Most others are exploring their options on incentives and examining if this is the right path to take. In some policy areas, like International Tax Reform, change has been driven by conscious political decisions. In other areas, such as the Future of Work, change has emerged more organically as modern patterns of mobile work, boosted in the post-pandemic world, have given rise to a range of tax issues for employers, employees, and for tax authorities[2]. The picture emerging from the 2025 Survey is one marked by a multiplicity of forms of work, of organizational models and of tax treatments. These give rise to a host of considerations across a range of taxes (is a Permanent Establishment created, when and where does liability for employment tax arise, is VAT registration required?), but not to a common approach globally. Questions around tax liability remain a central concern, but tax policy also plays a role in shaping the labor market flows which, in turn, will shape the Future of Work. The 2025 survey shows that while almost two-thirds of respondents have noted an increasing use of tax incentives or special tax regimes to attract foreign talent; close to a fifth have seen a decrease in the use of such measures. This suggests a level of volatility which will require particularly close monitoring. Arguably, the most significant tax policy development in 2025 is less a tax policy development than a change of approach: it is the emergence of tariffs as one of the principal levers of global policy making. For a world which has grown accustomed to looking at international competitiveness through a tax policy lens, this may require quite an adjustment in thinking. The 2025 Global Tax Policy Survey reveals a complex picture, characterized by a multiplicity of moving parts, a mixture of continuity and disruptions, and above all tax policy that continues to evolve in both expected and unexpected ways. There can be no one-size-fits-all prescription for how best to pick a path through this landscape. However, what can be safely prescribed is a proactive response in which companies calmly assess the situation across their global tax policy landscape, and broadly allocate resources to one of three buckets: One will contain the business-as-usual areas where the focus needs to be on routine implementation and compliance; Two will contain the areas where the current arrangements are sub-optimal, and therefore businesses need to engage with policymakers to secure policy change; Three will contain the issues where uncertainty and disruption abound and where the key focus is on closely monitoring developments and assessing risks and opportunities. Deloitte's Shaping the Path Forward offers some indispensable insights into the challenges likely to be encountered as part of this process. Read the Deloitte 2025 Global Tax Policy Survey to learn more.
