ANPThe Amsterdam Zuidas
NOS Nieuws•vandaag, 09:06
Julius Moorman
economics editor
Julius Moorman
economics editor
Never before have so many countries agreed on rules against tax avoidance. 139 countries have reached a consensus on a minimum rate for large multinationals: from next year they must pay at least 15 percent on their profits.
Companies affected by this are busy mapping the consequences for their organization and countries have their hands full introducing and implementing these new rules.
“This is the most important regulation in the history of international tax law,” says Annelien Dessauvagie, tax partner at accounting firm EY.
How does that work, and how effective are these rules against tax avoidance?
Large multinationals
The minimum tax applies to companies with a worldwide turnover of 750 million euros or more. In the Netherlands there are an estimated 3,000 companies.
These companies must always pay at least 15 percent tax on their profits. If they pay less than 15 percent tax abroad, additional tax must be paid in the Netherlands.
An example to illustrate: suppose that the subsidiary of a Dutch multinational pays 10 percent tax in its home country. Now that Dutch law prescribes a minimum rate of 15 percent from next year, the Dutch parent company must still pay the five percent difference in the Netherlands, even if that profit was not made in the Netherlands.
NOSEan example
This means there is less incentive for companies to shift profits to countries with a low rate. The rules also mean that it is no longer interesting for countries to attract business with a very low tax rate.
Because other countries are allowed to ‘levy’ up to 15 percent, countries with a rate below that are missing out on state revenue. The idea is that if you don’t lift, we will.
And that system already seems to be paying off: several countries in the Middle East, including the United Arab Emirates, are introducing a profit tax for the first time. Bermuda, a country that is seen as a classic tax haven, is also considering taxing the profits of large companies at 15 percent.
This new system is expected to go global $220 billion in tax revenues per year. The expectation for the Dutch treasury is 466 million euros annually. The Tax Authorities take 65 additional people to enforce the new rules.
Not just benefits
This system is effective, but it also has a downside, says Edwin Visser of PwC. According to him, many developing countries benefit little from the global minimum tax, because it becomes more difficult for them to attract business through a favorable tax rate. High-rate countries such as France and Germany would have pushed the hardest for the global minimum tax.
The rules are also very complex, and to implement them properly, as a tax authority you need a very tight organization, says Visser. “We are hiring 65 people here. But many countries absolutely cannot afford that.”
According to EY’s Dessauvagie, it is also a major challenge for multinationals that have to deal with the minimum tax. The complicated rules are accompanied by strict administrative obligations.
According to her, many companies in most countries already pay more than the agreed minimum rate of 15 percent. These companies must incur many additional costs to collect and organize all the necessary data to demonstrate that they are indeed compliant. “Ultimately you burden society with this, because in many cases these extra costs will be passed on to the consumer.”
Positive development
Despite the challenges posed by the new rules, Visser and Dessauvagie see the global minimum tax as a positive development. They are effective against tax avoidance and with a rate of at least 15 percent, the message is clear: the bottom has been reached.
Many companies are currently busy examining their international structure. It is still uncertain whether this means that some people will leave the Netherlands or whether new companies will be attracted. This varies per company and the tax rate is only one aspect that plays a role in the choice of location.
However, according to Visser and Dessauvagie, countries will probably become more creative in attracting companies. This could include financial support for research, stimulation of investments and assistance with sustainability.
The global minimum tax will come into effect on January 1, 2024. The Dutch Tax Authorities will not consider the first tax returns for 2024 until mid-2025.
2023-09-10 07:06:31
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