The OECD raises its income forecast by 50% for the minimum tax on multinationals

The pandemic before and the energy tsunami after have transformed uncertainty into routine and the elaboration of economic forecasts into a high-risk exercise.

They have also certified that every crisis has losers, a bag into which the most vulnerable always fall, and at the same time winners, in this case a bunch of large companies that have fattened their margins in the heat of an unfortunate situation for the majority.

This increase in corporate profits, however, has a double meaning: it will mean more tax revenue for States when the new international tax framework agreed within the Organization for Economic Cooperation and Development (OECD) is applied.

The agency, in a document published this Wednesday, believes that the minimum rate of 15% to multinationals will provide 220.

000 million (about 203,000 million euros), 46% more than expected in 2021, when a consensus was reached among 135 countries to curb tax avoidance by large companies.

The new scheme to reallocate corporate profits between countries – the other leg of the global pact – will affect a larger portion of corporate profits: 200,000 million dollars (184,000 million euros), 75,000 million more than initially calculated.

In addition to the increase in business benefits, this improvement is influenced by access to higher quality data and changes in the design of the new system.

The new scheme to reallocate corporate profits between countries – the other leg of the global pact – will affect a larger portion of corporate profits: 200,000 million dollars (184,000 million euros), 75,000 million more than initially calculated.

In addition to the increase in business benefits, this improvement is influenced by access to higher quality data and changes in the design of the new system.

The new scheme to reallocate corporate profits between countries – the other leg of the global pact – will affect a larger portion of corporate profits: 200,000 million dollars (184,000 million euros), 75,000 million more than initially calculated.

In addition to the increase in business benefits, this improvement is influenced by access to higher quality data and changes in the design of the new system.

Coordinated by the OECD and the G20 between constant tug of war, technical tirades and political clashes, the agreement has taken almost eight years to see the light of day.

Its main objective is to undo the previous rules of the game, which linked the payment of corporate tax to physical presence in the territory.

With the rise of globalization and digital business, this assumption has lost its meaning, since companies can obtain clients, income and benefits in any territory, even without the need to have establishments or workers there.

Based on this same logic, companies can also divert profits to low-tax countries and reduce their tax burden.

A practice that has spread since the 1990s and has unleashed perverse effects:

The two internationally agreed measures —known as pillar one and pillar two, in technical jargon— provide, on the one hand, to grant, through a new corporate profit sharing scheme,

also to those countries where the largest multinationals do not have a physical presence, but do do business.

That is to say, it will force the large groups – some 100 companies, calculates the OECD – to pay a part of taxes in all the territories where they operate.

On the other hand, a floor of 15% is set for corporate tax: if a company pays a lower percentage in one of the jurisdictions where it operates, it will pay the difference in the territory where its parent company is based.

"You do not want to completely eliminate international tax competition, but you do want to set a floor," David Bradbury, deputy director of the OECD Center for Tax Policy and Administration, stressed this Wednesday in a videoconference presentation in which he recalled that The forecasts released this Wednesday are preliminary since there are still technical issues to be closed - the practical implementation of the agreement is expected by 2024.

At the moment, the agency calculates that the improvement in the forecast collection of the minimum rate —equivalent to 9% of global income from corporate tax— is due to the improvement of the available data, which has shown an increase in taxable profits to low rates, such as changes in the design of the measure.

In the case of tax rights,

The analysis highlights that up to half of the benefits subject to the so-called pillar one would come from technology giants, which include telecommunications companies, digital platforms or manufacturers of electronic goods such as mobile phones or semiconductors.

The other 50% would come from companies in other areas, in which pharmaceutical companies stand out, which with the pandemic have raised their margins, or food.

This reallocation of corporate profits will translate into an additional collection of between 13,000 and 36,000 additional dollars globally with data from 2021, when there has been a strong rebound in corporate profits, a streak that according to the agency will continue for at least until 2022. If the 2017-2021 average were considered, the range would be between 12,000 and 12,000 million.

"Significant increases in tax collection underscore the importance of quickly implementing both pillars for all countries," says the OECD, which publishes its new estimates while the World Economic Forum is being held in Davos.

The event, which brings together the

of the political and economic world, has not overlooked in this edition -the appointment is annual- the damage that the current inflationary vortex is causing to the most disadvantaged while enriching the wealthy, the icing on the cake of a world that has grown strongly thanks to globalization at the cost of deep inequalities.

Numerous discussion tables have addressed the increase in inequality after the crisis of the pandemic and the war and the need for the economic elites and large multinationals to contribute more to tackle it.

Oxfam Intermón has recently put numbers on this phenomenon: the wealthiest 1% took over 63% of the new wealth generated worldwide between the end of 2019 and 2021, while some 1,700 workers lost purchasing power due to the rise in prices.

For now, several countries have taken tangible steps to implement the new international framework against multinational tax rackets, especially with regard to the minimum rate, which is less complicated to apply and whose technical details are at a more advanced level than tax rights.

The EU, after months of clashes and reluctance, reached a consensus in December on a community floor of 15% in line with the OECD design to replace the taxes that already work in several Member States, including Spain.

The United Kingdom, Canada and Korea have moved in the same direction.

Singapore, South Africa, Hong Kong or Switzerland have also announced that they will implement the standard, and others such as Australia or Malaysia have opened public consultations for its implementation.

Widespread implementation will help stabilize the international tax system, improve tax certainty and prevent the proliferation of unilateral taxes on digital services and associated tax and trade disputes, which OECD analysis shows could reduce global GDP by up to a 1% per year”, adds the document published by the club that represents the most advanced economies in the world.

Developing countries

The additional revenue brought by the new tax framework will be shared among low-, middle-, and high-income countries, while so-called investment centers—tax havens or states with aggressive taxation, such as the Netherlands—will bear the brunt.

The OECD, which does not yet have a country breakdown on the impact of the new measures, stresses that some of the latest technical changes will benefit developing countries above all, including measures that protect smaller jurisdictions from loss of tax rights or the priority assigned to developing nations when the location of the company's customers cannot be clearly determined.