Global taxation and developing world

Written by The Frontier Post

The European Council has discussed the new global minimum level of taxation for multinational firms along with other fiscal issues during the meeting of the Finance Ministers of the Group on Tuesday. According to details, the Ministers held a policy debate on the proposed Council’s directive on ensuring a global minimum level of taxation for multinational groups in the Union. The meeting also discussed the global OECD/G20 Inclusive Framework (IF) on base erosion and profit shifting (BEPS) as a two-pillar reform of the rules on international corporate taxation in the EU legal framework.
In fact, the issue of Base Erosion and Profit Shifting (BEPS) by the global multinational firms has become a serious concern for the governments around the globe because of the huge volume of online transnational trade and massive profit generation by the global business giants such as Amazon, Facebook, Googles, and others online business and marketing platforms in the present-day world. According to statistics, these global giants usually pay meager tax money to the countries where their head offices are located whereas they pay no tax to those countries from where they generate enormous wealth. Presently, the international community, G-7, G-20, the EU, and world financial institutions are working on a unified mechanism to deal with the problem on equal footing. Ostensibly, the international agreement of October 8, 2021, was the remarkable milestone in this direction which brought together 137 countries and jurisdictions, constituencies of the world towards an effective and fair system of profit taxation by the global community. Currently, the global community is working on a two-pillar strategy to assimilate new taxation into the global economy while fairly distributing tax share between the countries. The technical work on the first pillar of partial reallocation of taxing rights among the countries is underway in the OECD, while the work on the second pillar that is the minimum effective taxation of profit of multinational enterprises (MNEs) is also being deliberated at global forums. Hopefully, the new taxation laws would support the revenue generation of developing nations in the days to come.

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