The most developed countries will get the lion’s share of the new distribution of tax revenues generated by the international corporate tax reform agreed at the OECD in early October, according to an analysis published by the European Tax Observatory on Wednesday 27 October.
The agreement, which will be endorsed by the G20 countries meeting this weekend in Rome (see other news), provides for a reallocation of certain profits (pillar I) of multinationals with a global turnover of more than €20 billion and the introduction of a minimum tax rate of 15% for companies with a turnover of more than €750 million (pillar II) (see EUROPE 12808/2). This minimum tax rate is subject to deductions (‘carve outs’), which will reduce the tax base by amounts equivalent to a percentage of the net asset value and payroll in the countries where these companies are located.
“We find that high-income countries stand to gain the most from a 15% global minimum tax because most multinational companies are headquartered in high-income countries“, says the Observatory. Furthermore, “While developed countries would generate around 19% extra revenues with respect to their current corporate taxes paid, the developing countries would generate only about 2% of additional revenue”.
According to this body, without the application of the deductions and based on available data from the 2017 tax year, the EU would increase its corporate tax revenues by €83.3 billion per year, an increase of one quarter of current revenues.
With the application of the exemptions, the intensity of which will decrease over time and stabilise after 10 years, the tax revenue redirected to the EU will actually be €63.9 billion at the beginning of the application of the international agreement, stabilising at €71.5 billion 10 years later.
Belgian jackpot. Within the EU, Belgium would increase its revenues by €20.1 billion (first year of the agreement’s application) and by €20.6 billion (after 10 years). This is followed by Ireland (€10.9 and €11.5 billion), Germany (€7.8 and €9.9 billion), Luxembourg (€4.5 and €5.0 billion), France (€3.3 and €3.5 billion), Spain (€2.5 and €3.6 billion), Italy (€2.3 and €2.6 billion), Poland (€2.0 and €2.7 billion), Sweden (€2.0 and €2.3 billion), and the Netherlands (€1.7 and €2.0 billion).
The United States would gain about €57 billion per year. Revenue gains would be lower in developing countries: €6 billion for China, €4 billion for South Africa, and €1.5 billion for Brazil.
See the Observatory’s report: https://bit.ly/3GwvV4G (Original version in French by Mathieu Bion)