A global taxation agreement: about time

Finally, after many years delay, an agreement for a common 15% corporate tax rate for international companies originally announced at the G7 summit in London in June has been ratified by 136 countries and jurisdictions representing more than 90% of the world economy.

Over the years, we have seen how a system based on borders and on the sovereignty of countries to decide their tax policies has been abused by a large number of companies that, by operating in different countries, have been able to avoid paying their fair share of tax, playing a game of cross-invoicing and transfer pricing between their different subsidiaries that allowed them, in the end, to end up paying utterly ridiculous tax rates, in a waste of aggressive tax optimization engineering that has seen many of the countries where they carried out their activities to be deprived of fair income.

Now, this abuse of the system may have come to an end, or at least its days are numbered: from 2023, all multinational companies whose worldwide sales exceed €20 billion and whose profitability exceeds 10% will have to pay tax of at least 15% of their turnover in the countries in which they carry out their activities, which will entail a reallocation to market jurisdictions of 25% of profits exceeding a 10% threshold. This amounts to around $125 billion globally. This minimum tax rate will apply to…