No global minimum tax holdouts have left negotiations, OECD official notes

By Doug Connolly, MNE Tax

The seven countries that have yet to sign onto the Inclusive Framework’s statement endorsing the adoption of a global minimum tax have their reasons for holding off, but “it is important to highlight that all of the countries” remain constructively engaged, according to Grace Perez-Navarro, Deputy Director of the OECD’s Centre for Tax Policy and Administration.

Speaking virtually at a July 13 Tax Policy Center event, Perez-Navarro said some of the countries just want more time to assess the provisions included in the statement recently endorsed by 130+ countries.

With some details yet to be finalized, including the rate of the minimum tax – currently defined as “at least 15%” – other countries are holding out to see how the final details turn out, Perez-Navarro explained.

Specifically highlighting Ireland in this respect, Perez-Navarro said that “some countries have expressed concern that, well, they might be okay with 15%, but they may be less okay with higher rates.” These countries would like to see how remaining negotiations play out before they commit to anything.

Notably, the President of Estonia, another of the seven holdouts, said today that the country is holding out only to see more technical details, according to a CNBC report. Estonia’s corporate tax rate is already above the proposed minimum, unlike Ireland, and it has no companies that will fall under the new rules.  The country merely seeks to confirm compatibility with domestic legislation before committing. 

Whatever their reasons for holding off, Perez-Navarro noted that all the holdout countries “have indicated that they intend to continue to work constructively, through the Inclusive Framework, through this next phase of the project. And so we will expect that by the end, they will be joining us.”

In this respect, there are already two countries – Peru and Saint Vincent and the Grenadines – that have signed on after initially holding out on the July 1 release of the statement.

There is also interest in seeing how the US adapts its global intangible low-taxed income (GILTI) minimum tax to align with the minimum tax contemplated in the Inclusive Framework statement. The Biden Administration has proposed amending GILTI to increase the rate to 21% and require country-by-country calculation, but such measures will still have to make it through Congress.

“There is agreement that consideration will be given to the conditions under which the US GILTI regime will coexist with the GloBE rules to ensure a level playing field,” Perez-Navarro said. “And this obviously signals that we need to see what changes may come about to the GILTI rules going forward.”

Responding to a question about whether the minimum tax would be based off book income or tax income, Perez-Navarro clarified that the minimum tax calculation will rely on “financial statements with certain adjustments.” Such an approach was described in the OECD blueprint issued last October. She explained that this decision was made to ensure the necessary information would be available to all countries, including developing countries.