If a Minimum Tax Is Introduced for Multinational Corporations, Tax Revenue Could Increase by Up to 253 Trillion Won

Global Corporate Tax Revenue Increases 6.5~8.1%
"Investment Focused on Infrastructure Over Taxes...Improved Capital Allocation"

Starting this year, as South Korea, the European Union (EU), Japan, the United Kingdom, Canada, Norway, and others have introduced a global minimum tax, it is projected that the implementation of the minimum tax will increase corporate tax revenues for governments worldwide by up to 253 trillion won.

On the 9th (local time), the Organisation for Economic Co-operation and Development (OECD) announced this in its report titled "Economic Impact Assessment of the Global Minimum Tax."

The global minimum tax was created to address the issue of multinational corporations shifting to tax havens that impose effective tax rates lower than the minimum tax rate (15%) to pay less corporate tax. If an effective tax rate lower than 15% is applied in a specific country, the difference can be taxed by another country. For example, if a Korean company pays corporate tax at a 10% rate in the country where its factory is located, the remaining 5% tax must be paid to Korea. This is the result of discussions among over 140 countries led by the OECD. It applies to multinational corporations with consolidated financial statement sales of 750 million euros (approximately 1.095 trillion won) or more in at least two of the last four fiscal years.

The OECD's report forecasts that the introduction of the global minimum tax will increase government tax revenues worldwide by $155 billion to $192 billion (approximately 204 trillion to 253 trillion won). This means a 6.5% to 8.1% increase in corporate tax revenues globally. About one-third of the increased tax revenue results from a reduction in profit shifting by multinational corporations to tax havens.

With the introduction of the minimum tax, the average tax rate difference between tax havens and other countries will decrease from the current 14 percentage points to 7 percentage points. It is estimated that currently, 36% of profits generated by companies worldwide are subject to tax rates below the minimum tax, but with the implementation of the minimum tax, only 7% will be subject to rates below 15%. The OECD expects that this will reduce the annual profits shifted by multinational corporations to tax havens from $698 billion (approximately 921 trillion won) to about half. Tax haven countries could lose about 30% of their tax base due to reduced shifted profits.

David Bradbury, Deputy Director of Tax at the OECD, said, "The global minimum tax reduces incentives to shift profits and increases the importance of non-tax factors, improving capital allocation." Going forward, multinational corporations will prioritize non-tax factors such as human resources and infrastructure over tax reduction when choosing investment locations. Governments will also have less incentive to become tax havens.

Currently, among the over 140 countries that have signed the global minimum tax agreement, only 45 countries are preparing legislation to apply the minimum tax to multinational corporations. Meanwhile, the United States and China view the introduction of the minimum tax positively but have yet to establish the system. U.S. Treasury Secretary Janet Yellen initially expected Congress to act once other countries implemented the minimum tax and collected taxes from U.S. companies, but within the Biden administration, it is believed that this will only be possible after the presidential election in November.

This content was produced with the assistance of AI translation services.