G7 Nations Agree to Corporate Tax of at Least 15%, Hong Kong, Singapore & Switzerland Prepare for Change

G7 Nations Agree to Corporate Tax of at Least 15%, Hong Kong, Singapore & Switzerland Prepare for Change

9th June 2021 | Hong Kong

The G7 Nations United States, Japan, Germany, Britain, France, Italy and Canada have agreed to a new minimum global corporate tax rate of at least 15% on overseas earnings, instead of companies paying taxes in where they are headquartered.  Countries that have lower tax rates such as Ireland (12.5%), Hong Kong (16.5%), Singapore (17%), Switzerland (21.1%) can attract more foreign & international companies to setup headquarters compared to countries with higher tax rates such as United States (25.8%), Canada (26.5%), Japan (29.7%), Germany (29.9%) and France (32%), and with some countries providing further concessionary tax rates (reduced tax rates) to attract targeted sectors such as in the technology sector (Eg. Apple, Amazon, Google, Facebook).  The lower tax rates or concessionary tax rates  have allowed companies and big companies to save billions in taxes by shifting jurisdiction (headquarters).

” G7 Nations Agree to Corporate Tax of at Least 15%, Hong Kong, Singapore & Switzerland Prepare for Change “

G7 Nations ~ The G7 comprises of 7 of of the largest economies in the world.  United States, Japan, Germany, Britain, France, Italy and Canada.

Hong Kong, Singapore, Switzerland, China, Tax Havens (BVI, Cayman, Bermuda)

Leading financial centres such as Hong Kong, Singapore and Switzerland, that have provided further concessionary tax rates (reduced tax rates) to attract targeted sectors, have responded officially to the intent of G-7 to have a new minimum corporate tax rate of at least 15%, and will adjust the tax-rates if it goes through.  Fast growing China corporate tax rate is 25% and India corporate tax rate is 22%.  Most of the countries in Asia-Pacific have a corporate tax rates of 20% to 25%.

Tax avoidance, tax structuring has been a big issue for many governments, including companies and wealthy individuals setting up offshore companies in tax havens such as British Virgin Islands (BVI), Cayman Islands and Bermuda, that have 0% tax.

Selected Global Tax Rates (Low to High):

• Cayman Islands – 0%
• British Virgin Islands – 0%
• Bermuda – 0%
• Ireland – 12.5%
• Hong Kong – 16.5%
• Singapore – 17%
• Thailand – 20%
• Vietnam – 20%
• Taiwan – 20%
• Switzerland – 21.1%
• Indonesia – 22%
• India – 22% 
• China – 25%
• Korea – 25%
• Malaysia – 25%
• Philippines – 25%
• Australia – 25%
• United States – 25.8%
• Canada – 26.5%
• New Zealand – 28%
• Japan – 29.7%
• Germany – 29.9%
• France – 32%

G7 Tax Agreement, Next Meeting with G20 in July

The G7 agreement comprises of 2 key areas: a global tax rate of at least 15% and a new profit allocation where at least 20% of the profit of a multinational group above a nominated profit threshold of 10% will be allocated to market jurisdictions.  (The consensus to adopt a common tax rate was reached at the G7 finance ministers’ meeting held in Buckingham, England on the 5th June 2021.)

In July 2021, the G7 will share the proposal to G20, in the meeting that will be attended by 140 countries at the Organization for Economic Cooperation and Development.

The G20 members are: Argentina, Australia, Brazil, Canada, China, France, Germany, Japan, India, Indonesia, Italy, Mexico, Russia, South Africa, Saudi Arabia, South Korea, Turkey, the United Kingdom, the United States, and the European Union. Spain is also invited as a permanent guest.

Panama Papers: Mossack Fonseca leak reveals elite’s tax havens – BBC News

In 2016, the leaked of the Panama Papers: Mossack Fonseca, revealed the world’s rich and powerful using tax havens to hide their wealth.

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• Former Prime Minister of Malaysia Najib Razak Faces Bankruptcy Notice for $408 Million in Unpaid Taxes
• KPMG Report: Global Family Business Tax Monitor 2020
• HSBC UK Faces $1.61 billion Lawsuit for Tax-Efficient Disney Films Investments
• Panama Papers: Mossack Fonseca leak reveals elite’s tax havens – BBC News

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