Tax experts have recommended increasing the international minimum tax for companies to 25 percent. With this minimum rate, tax revenues would almost triple, according to an analysis published today by the EU Tax Observatory.
The Paris-based research center on international taxation also recommended filling gaps in the current rules, as these have halved expected revenues and drastically weakened the instrument. International negotiations on this issue must be resumed.
Experts: Downward competition is still possible
In 2021, the EU and the US, along with around 130 other countries, agreed on an ambitious international tax reform to prevent the transfer of corporate profits to tax havens. The core was the global minimum tax of 15 percent for companies operating internationally with annual sales exceeding 750 million euros, regardless of their location.
Tax experts have criticized the fact that the global minimum tax still allows for downward tax competition. Companies could potentially maintain effective tax rates below 15 percent and be incentivized to shift production to very low tax countries. “Once again, an incentive for tax havens to keep their tax rates below 15 percent.”
Minimum tax proposed for billionaires
In the report, experts also propose a global minimum tax of 2% for billionaires. Their effective tax rates range between zero and 0.5 percent of their assets because they often use shell companies to avoid paying income tax. “So far, no serious attempts have been made to resolve this situation,” criticized the experts.