In July this year, HM Wilkins Imperial reported that 130 countries and jurisdictions, corresponding to over 90% of worldwide GDP, coalesced in a two pillar proposal aimed at international tax reforms centred on guaranteeing multinationals contribute their fair share in taxes in regions in which they operate and in those they earn.
The implementation of this new framework is set to be finalised in October – a well overdue update to the League of Nations century-old tax system presiding over a now digitized and globalized economy notes an economist at HM Wilkins Imperial.
The first pillar is targeted at creating a fairer allocation of tax rights and revenue amongst bigger multinationals, as well as digital corporations. The plan is to redistribute a portion of taxing rights from the domestic countries of MNEs to the markets in which they operate and generate profit, despite physical presence. The second pillar proposes a worldwide minimum corporate income tax rate of at least 15%, as a means of protecting global tax bases.
These reforms, although ambitious in their implementation timeline, will bring about much needed justice and security to a system that favors multinationals, enhancing monopolization, and draining capital from poorer nations to richer ones. Economists at HM Wilkins Imperial state that in order for fair taxation multinational enterprises cannot be viewed as loosely connected separate entities, but rather singular ones. This is mirrored in the tax reform legislation aimed at geographically apportioning profits based on an algorithm equating proportional real economic activity, effectively inhibiting tax havens.