forum. On June 5, 2021, the Finance Ministers of the Group of Seven countries solemnly reaffirmed their support for the efforts made to distribute the tax base more equitably with the support of the OECD and announced their support for the implementation of minimum tax rates for multinational companies. Companies, they recommend setting it to 15%.
The statement was issued after the U.S. Department of the Treasury released a 19-page report on April 7, which further explained President Joe Biden’s “Made in America” tax plan, which complements “Infrastructure proposal. Submitted this week more than 2 trillion dollars ago. The tax plan will raise approximately US$2.5 trillion in 15 years, and the government says this will completely offset the cost of its infrastructure proposals.
In addition to raising the federal tax rate from 21% to 28% (President Biden subsequently stated that the tax rate may eventually be set at 25%, which is the French corporate tax rate in 2022), this measure has attracted special attention: the headquarters Companies located in the United States should certify that the profits of their overseas subsidiaries have paid a minimum tax rate of 21% in accordance with national regulations.
Otherwise, they will have to pay additional taxes in the United States, and their tax rate will correspond to the difference between the actual foreign tax rate and the 21%. As a reminder, in the current system, the lowest tax rate understood by the world, not the country/region, is set at 10.5%.
To measure the magnitude of this change, only two examples are needed.
-A US company has a subsidiary that is taxed at 12.5% in Ireland. Today, it does not pay any taxes on Irish performance in the United States. Tomorrow, it may be required to pay additional taxes on the profits of its subsidiaries in Ireland at a rate of 8.5% (21-12.5).
-A US company has multiple subsidiaries abroad, some of which are not taxed, while others are subject to a 28% tax rate. Under the current system, if the average tax rate estimated at the world level reaches 10.5%, the United States does not need to pay taxes. As a result of the reforms, a tax rate of 21% or close to 21% will apply to the results achieved in states with no or very low taxes.
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