The United States, along with India and approximately 140 other nations around the world are closing in on making a global tax agreement. Particularly, U.S. Treasury Secretary Janet Yellen and India Finance Minister Nirmala Sitharaman have been working together closely as the next G20 Summit meeting approaches. Yellen said in a statement that she very much appreciated India’s focus and initiative when it comes to finalizing the “historic Two-Pillar global tax deal.”
Overview
“I believe that we are close to reaching an agreement,” Yellen said in a statement at a recent meeting. The purpose of the global tax agreement is to hold multinationals accountable and ensure that they pay taxes wherever they operate. The minimum taxed amount that has been agreed upon by these countries country is a 15% rate. In coming to this agreement, however, the global tax standards that are followed worldwide would have to be completely overhauled.
Issues Yet to be Addressed
Despite all of these nations approaching an agreement, there are still some major issues that have not been addressed. These issues include the share of profit allocation and the total scope of tax rules that will be subjected to change. According to sources close to this situation, a “consensus agreement” will have to be made regarding all of these technicalities.
Two Pillars
The two-pillar solution that was previously mentioned essentially consists of two components. The first component consists of the reallocation of additional profit share to certain market jurisdictions. The second component involves the implementation of the minimum tax and any tax rules that may be subject to change.
Protecting Developing Nations
India has been very consistent in calling for the protection of the developing nations that are involved in this deal. Part of the Global Tax Deal must ensure that these developing nations don’t suffer unforeseen consequences. Ensuring their protection is also of vital importance because developing nations make up approximately one-third of the 140 nations involved in this deal.
Wrap Up
While Janet Yellen is optimistic that a Global Tax Deal is soon to be made, there are still a lot of technicalities and other specifics that need to be addressed, before an official agreement can be made. As this story develops, be sure to visit our website for all updates regarding the Global Tax Deal.