In October 2021, leaders from the Group of Twenty, which is an integer-governmental forum consisting of 19 countries and the European Union, where on a meeting on various issues associated with the global economy. One major item among that discussion was the international tax agreement on the globalized minimal corporate tax rate of around 15% for the MNC firms.
The agreement was forged by the Biden Administration with around 140 countries and will be targeted to be a milestone in tax fairness for smaller businesses. Experts like William D King are here to talk about this notion more and to help you understand why global minimum tax agreement is best for the smaller businesses.
For the latest changes:
For multiple years now, the smaller firms have been crushed to be right at the bottom where the bigger firms can leave the country or can hide their profits offshore for lower tax rates. Countries always tried reducing their tax rates for encouraging the MNCs to ship their profits and jobs offshore.
- When the corporations were able to take advantage of such loopholes and perverse incentives, the smaller businesses and workers were the one to suffer and the wealth gap widens.
- A latest Financial Accountability and Corporate Transparency Coalition states that the level of playing between the US MNCs and Domestic businesses were huge and it resulted in aggressive tax planning.
Now, the tables have turned and there are some ways in which the global minimum tax agreement can help out the smaller businesses in question.
Deal with fair law of taxes:
In a research it was found out that around 81% of the Americans still believe that the US firms don’t pay their fair share of taxes. In 2018, a married working couple paid more than 20% of their income in self-employment and income taxes. On the contrary, the US MNCs paid even less than 10% in the corporate income taxes on the USA profits.
- This stage was snot just considered to be unfair but also harder for the smaller businesses to have the financial strength they need for growing their business and operate in the same space as the large corporations.
- In May 2021 survey, it was found out that smaller businesses are feeling impacts of such pressure with 76% of them getting harmed hen the bigger firms are using loopholes to avoid the taxes.
With the help of global minimum tax, the disparity will get reduced and that will lower the tension level among small business owners for sure.
Stronger Main Streets now:
Main Streets are suffering more than before because companies are moving jobs offshore. But, it has been a constant truth that Main Streets were sign of a stronger economy for the country. So, the International Tax Reforms will eliminate incentives for shifting profits and jobs abroad and ensure that the MNCs pay their fair shares here back at home. So, the latest changes in the Income Tax section, especially in Global Tax Agreement will save the smaller businesses surely.
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