The international community should agree on the establishment of a global minimum corporate tax rate, according to a new UN report. The proposal is part of a package of reforms to combat tax evasion and money laundering, and ensure that cash strapped governments can boost their public finances in the wake of the COVID-19 pandemic.
The report by the UN panel on international financial accountability, published on Thursday (25 February), transparency and integrity (Facti) contends that an agreed minimum tax rate of 20-30% on company profits would limit incentives for multinational companies to shift profits to lower-tax jurisdictions.
The UN paper also recommends that all countries establish beneficial ownership registers holding information on all legal firms, and for all multinational corporations to publish their country– by– country reports.
Writing the report’s foreword, Ibrahim Mayaki, the former Prime Minister of Nigeria and former Lithuanian President Dalia Grybauskaite, the co-chairs of Facti, stated that “gaps, loopholes and shortcomings in rules, and their implementation, allow tax abuses, corruption, and money laundering to flourish.
These illicit financial flows represent a double theft: an expropriate of funds that also robs billions of a better future.”
Facti was launched in March 2020 to study the impact of tax abuse, money laundering and illicit financial flows on the ability of states to meet the UN’s Sustainable Development Goals by 2030. The findings of the report were presented to UN member states on Thursday.
“Our report rests on two simple ideas: restore public finance by fixing a broken system and use the trillions of dollars released to eradicate poverty, recover from Covid and tackle the climate crisis,” said Grybauskaite.
For the moment, however, there is little prospect of the proposals becoming reality.
Although the European Union has taken steps to introduce country by country reporting, a group of 12 countries opposed a planned EU directive that would have forced multinational companies to reveal how much profit they make and much tax they pay in each country across the bloc.
Meanwhile, corporate taxation also remains closely guarded by national treasuries. Plans to harmonise corporate tax across the EU have been repeatedly rejected by a handful of countries.
Tax Justice Network chief executive Alex Cobham welcomed the report as “a tide-turning moment in the fight against international tax abuse.
“The heat is now on to move rule-making out of the hands of a few rich countries at the OECD and to a globally inclusive forum at the UN,” he added.
Illicit capital flight and massive lost revenue from tax avoidance and evasion have been a long-running phenomenon and a major source of lost income across the world, and particularly for African treasuries which lose an estimated $10 billion per year to tax havens.
The G77 group of developing countries has called for global tax policies to be entrusted to a new UN tax body on which they would be represented, taking over the role from the Paris-based Organisation for Economic Cooperation and Development, whose 35 members include no developing countries.
However, this proposal, which has been on the table for most of the last decade has repeatedly been opposed by the European Commission, and most of the EU’s member states, along with the United States and Japan.
[Edited by Zoran Radosavljevic]