G20's 2023 target for global minimum corporate tax may not be realistic

IF all goes well, leaders at the upcoming G20 summit in Rome will endorse the new global minimum tax deal. The new rules are to ensure that multinational enterprises pay their fair share of tax - at least 15 per cent - in the places where they operate.

Over the years, income from intangible goods - such as patents, copyrights and other royalties on intellectual property - has migrated to low-tax jurisdictions, allowing firms to avoid paying higher taxes where their profits are actually generated. This has shifted the tax burden from corporations to labour and land. Several economists have argued that since the Reagan-Thatcher years, when this phenomenon became rampant, the tax shift has led to political polarisation and has caused social unrest.

The Organisation for Economic Cooperation and Development (OECD) grouping of mostly rich nations has long sought to curb such tax schemes. It has persuaded 136 tax jurisdictions to sign up to a two-pillar plan to reform international taxation rules that would make it harder for companies to avoid taxation. The 136 countries represent more than 90 per cent of global gross domestic product (GDP). Four - Kenya, Nigeria, Pakistan, and Sri Lanka - declined to sign up.