A global minimum tax on firms is finally taking shape

By Mark Johnson

More than 130 countries struck a historic deal in 2021 that sought to change the way big companies are taxed. This agreement promised to alter how countries divvy up the right to tax multinational companies’ profits. It also decreed that no big firm should pay tax at a rate lower than 15%, no matter where it books its profits (an idea known as the “global minimum tax”). But the fanfare underplayed quite how much of the nitty-gritty was still to be worked out. In 2024, however, some elements of this big deal will at last start to have an impact.

The changes that are coming soonest relate to the global minimum tax. In 2024 laws that bring it closer will go into force in Britain, the eu, Japan and elsewhere. Most of these places already tax companies more than 15%. But from now on they will also start collecting “top-up” taxes from big firms that use legal loopholes to shift profits to places such as Caribbean tax havens which charge lower rates. The idea is to halt a “race to the bottom” in which for years governments have slashed corporate-tax rates to attract investment. Though at first only a handful of big countries will enforce the minimum tax, more will follow.