The global minimum corporate tax rate, or simply the global minimum tax (abbreviated GMCT or GMCTR), is a minimum rate of tax on corporate income internationally agreed upon and accepted by individual jurisdictions. Each country would be eligible to a share of revenue generated by the tax. The aim is to reduce tax competition between countries and discourage multinational corporations (MNC) from profit shifting to achieve tax avoidance.
In 2021, 136 countries agreed to a plan of Organisation for Economic Co-operation and Development (OECD) to implement 15% global minimum tax rate, starting in 2023.The agreement established a two-pillar solution focused on revising tax rules to address profit shifting and base erosion caused by tax avoidance practices and to meet challenges created by the increasingly digitalized global economy. Big multinationals such as Apple, Alphabet and Facebook, as well as those such as Nike and Starbucks are funneling profits through low-tax jurisdictions to avoid paying taxes. The new proposal is thus aimed at minimizing the opportunities for multinational enterprises (MNEs) to indulge in profit shifting.
Although there is a growing call for making the tax regime inclusive, there should be appropriate coordination between the application of the new international tax rules. Any final agreement could have major repercussions for low-tax countries and tax havens. A UN tax convention, where global rules are determined by democracy not plutocracy, can make the implementation and coordination smoother with time.