The OECD ensures that big companies pay a minimum tax rate of __ percent.
Answer
a. 15
b. 23
c. 5
d. 20
e. 10
The correct answer and explanation is:
The correct answer is a. 15.
The Organisation for Economic Co-operation and Development (OECD) has worked on a global minimum tax rate to address tax avoidance by large multinational corporations. The OECD’s framework aims to establish a minimum tax rate of 15% for these companies, preventing them from shifting profits to low-tax jurisdictions. This global minimum tax rate was agreed upon by over 130 countries in 2021 as part of an effort to reform the international tax system. The goal is to stop companies from exploiting tax havens to reduce their tax obligations significantly.
The OECD’s new rules target companies with global revenue exceeding a certain threshold, which makes it difficult for them to shift profits to countries where tax rates are much lower than in their home countries. By implementing a minimum tax rate, the OECD hopes to ensure that companies contribute fairly to the tax systems of the countries where they operate, thereby promoting equity and fairness in global tax practices. This measure also aims to prevent the so-called “race to the bottom,” where countries reduce their tax rates to attract multinational corporations at the cost of tax revenues.
In addition to the 15% minimum tax rate, the OECD’s tax reform includes measures to ensure that profits are taxed where economic activities occur, rather than just where companies are based. This helps combat the harmful tax practices of profit shifting and base erosion, which often result in governments losing out on substantial tax revenues.
Overall, the OECD’s global tax reform represents a significant step toward creating a more balanced and equitable international tax system that better reflects the economic realities of global business operations.