The menace of hackers is all pervasive defrauding citizens day in and day out around the world. They are always one up the cyber security ring created to insulate the citizens, corporates and government alike.
Now why will hackers be welcome globally? If the hackers are the finance ministers of the powerful G7 countries being UK, Canada, France, Germany, Italy, Japan and the US and hacking into plug tax loopholes enjoyed since many years by various MNC’s like the Amazons, the Facebooks and the Googles of the world, then surely it will be a welcome sign for the years to come for many countries.
Corporate tax rules around the world require a physical presence to tax income earned by enterprises. However these digital based MNC’s sell their services to consumers around the world and do not have a physical presence in any specific country, making it harder to tax businesses in the virtual world. The European Union recently estimated a 14-percentage-point gap in the tax rate between digital companies and bricks-and-mortar rivals. Through treaty shopping existing between countries, these MNC’s register themselves in tax havens around the world paying little or no tax on income earned. Some examples – Irish subsidiary of Microsoft Corp. paid zero corporation tax thanks to its residency in Bermuda. In 2014, Apple Inc. was estimated by the European Union to have paid a 0.005% tax rate.
It’s taken decades of pressure, a financial crisis and a pandemic to get to a point where the G7 countries have agreed to commit to a global minimum tax of at least 15 per cent on a country by country basis. The tax havens will surely face the music in front of these powerful countries as they will lose their tax revenues. Finance officials believe that if enough advanced economies sign on, then other countries will be compelled to follow suit.
The real risk is of future loopholes to come. Enforcement and tax collection will be a big part of making this deal stick. Simplification and clarity are both needed to avoid the global tax system collapsing under its own weight.
NPowersU Expert Opinion
Global minimum tax rate is a step in the right direction. It will help the brick and mortar enterprises to compete against these global giants and also reaffirm their belief that hard work too pays and marketing should always be incidental to manufaturing.
Related Links
https://www.bloomberg.com/opinion/articles/2021-06-07/taxing-amazon-is-like-squeezing-a-rice-pudding