Global corporate minimum tax plan explained: How the G20-backed tax would work

The Group of 20 summit backed a global minimum tax of at least 15%, a key initiative pushed by President Joe Biden. Here’s what’s next and what that would mean.

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British Prime Minister Boris Johnson (from left), French President Emmanuel Macron, German Chancellor Angela Merkel and President Joe Biden at the G20 summit in Rome.

British Prime Minister Boris Johnson (from left), French President Emmanuel Macron, German Chancellor Angela Merkel and President Joe Biden at the G20 summit in Rome.

Stefan Rousseau / Pool via AP

ROME — One of the takeaways from the recent Group of 20 summit in Rome was the broad support world leaders showed for sweeping changes aimed at deterring big global companies from stashing profits in tax haven countries where they pay little or no tax.

The most important part of the proposal that would update a century of international taxation rules to cope with changes brought by digitalization and globalization: a global minimum tax of at least 15%. That was a key initiative pushed by President Joe Biden.

“This is more than just a tax deal — it’s diplomacy reshaping our global economy and delivering for our people,” Biden tweeted from the summit.

Treasury Secretary Janet Yellen says it will end a decades-long “race to the bottom” that’s seen corporate tax rates fall as tax havens sought to attract businesses that used clever accounting to take advantage of low rates in countries where they had little real activity.

Here’s a look at key aspects of the tax deal:


In today’s economy, multinationals can make big profits from things like trademarks and intellectual property that are easier than factories to move. Companies can assign the earnings they generate to a subsidiary in a country where tax rates are very low.

Some countries compete for revenue by using rock-bottom rates to lure companies, attracting huge tax bases that generate large revenue even with tax rates only marginally above zero.

Between 1985 and 2018, the global average corporate headline rate fell from 49% to 24%.

By 2016, over half of all U.S. corporate profits were booked in seven tax havens: Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland.

White House officials say the global minimum would result in nearly $60 billion of added U.S. tax revenue.


Countries would legislate a minimum rate of at least 15% for very big companies with revenues over $864 million a year.

If company earnings go untaxed or lightly taxed in one of the world’s tax havens, their home country would impose an additional tax that would bring the rate to 15%.

That would make it pointless for a company to use tax havens because taxes avoided in the haven would be collected at home.


The plan also would let countries tax part of the earnings of the 100 or so biggest multinationals when they do business in places where they have no physical presence, such as through Internet retailing or advertising. The tax would apply only to a portion of profits above a profit margin of 10%.

In return, other countries would abolish their digital services taxes on U.S. tech giants such as Google, Facebook and Amazon. That would head off trade conflicts with Washington, which argues such taxes unfairly target U.S. companies.


Biden has said the United States must join the global minimum tax to persuade other nations to do so. That would involve raising the current rate for foreign earnings from 10.5% to reflect the global minimum. His tax proposals are still being negotiated in Congress.

U.S. participation in the minimum tax deal is crucial because so many multinationals are headquartered there — 28% of the 2,000 biggest global companies. Rejection of Biden’s proposal would seriously undermine the international deal.


Some developing countries and advocacy groups such as Oxfam and Britain-based Tax Justice Network say the 15% rate is too low. And though the global minimum would capture $150 billion in new revenue for governments, most of it would go to rich countries because they’re where many of the biggest multinationals are based.

U.S. critics including Republican leaders and some business groups say the proposed minimum tax would make America less competitive and potentially cost jobs


Backing from the G-20 leaders completes a years-long negotiation process.

After the G-20 approval, implementation moves to the individual nations. The tax on earnings where companies have no physical presence would require countries to sign onto an intergovernmental agreement in 2022, with implementation in 2023.

The global minimum could be applied by individual countries. If the United States and European countries where most multinationals are headquartered legislate such minimums, that would have much of the intended effect even if some tax havens don’t.

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