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GLOBAL MINIMUM TAX RATES A POSSIBILITY?

Some governments allege shift billions of dollars in profits every year to low-tax havens, as well as triggering a fundamental reassessment of corporate earnings.Global top head planning to bring global minimum corporate tax rate to put a check.However, likely to have major blow to the multinationals.The chances of such reform rose this week as Treasury Secretary Janet Yellen threw the weight of the U.S. government behind a push to upend international tax rules.

A minimum corporate tax level would stamp out the ability of companies to move income from “intangible” sources, such as patents, software and royalties, to countries with lower rates. However, technology and healthcare firms are seen as major beneficiaries of tax arbitrage.

A minimum corporate tax could also double the existing tax paid on profits for some companies and cause a major headache for countries such as Ireland which have attracted many with a 12.5% rate, which research last year showed is half the global average. Profit shifting amounted to almost 40% of multinational profits and that 35% of these profits came from non-haven EU nations, while 25% were from the United States.

The proposed reforms would probably also lower public revenues in poorer European Union states such as Hungary and Bulgaria with statutory tax rates of 9% and 10% respectivelyand it would shift taxable revenues back to high-tax countries such as France, Germany and Italy where rates range from 28% to 32%.

While tax increases are likely on the horizon, they are also likely to be watered down in the final version, take longer to pass, be less of a headwind to economic growth, and, as a result, give even more runway for equities and risk assets to rally.





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