The chances of global consensus on reforming the way multinationals are taxed have been revived thanks to the change in the US administration. The G7 agreement in June on both a global minimum tax and reallocation of global profits of multinationals to the market jurisdictions provides impetus towards a broader consensus at the G20 level in July, with a final deal expected by the end of 2021.
As countries look for revenues to fund a sustainable recovery post-COVID, there is an historic opportunity to stop profit shifting by multinationals and put an end to harmful tax competition between countries, which in turn would allow governments to make corporate tax systems more progressive. It can also provide the EU with an opportunity to move forward towards deeper European economic integration and progressive taxation of multinationals to ensure corporations contribute their fair share to the recovery post COVID.
This policy brief looks at the ongoing international tax negotiations and the opportunity that a 2021 global agreement would bring to the European Union to play a leadership role in the modernisation of global business tax rules.