Following the decision by the finance ministers of the G7 group of the largest industrialized countries on a historic plan to introduce a global minimum rate of corporation tax, other countries will not be obliged to raise their tax rates, but according to the Bank of Israel, they will probably be subject to sanctions if they don't, making it not worthwhile for them not to adopt the measure.
The aim of the reform, to be presented in Italy next month at a meeting of the G20, is to halt the race to the bottom in corporate taxation that has been going on for three decades, in which developing but wealthy nations like Ireland try to attract multi-national corporations through very generous tax breaks. Under the G7 proposal, there will be a uniform minimum corporation tax rate of 15%.
Responding to an enquiry from "Globes", a Bank of Israel official said, "This is a trend that began a decade or more ago, with the adoption of the various treaties in the war on illicit capital and the abolition of tax havens. Similar motivations are behind a global uniform rate of taxation of companies. The move was put together against the background of the race to the bottom in tax rates, and its advancement represents a step designed to prevent unfair competition between countries.
"Since Israel is a small country, the answer to the question whether we will lose or gain from the move will become clear only when rules and a detailed agreement are drawn up for the global tax rate. The choice of whether or not to adopt the reform will probably not be in Israel's hands, since it is a matter of international legislation that will be accompanied by sanctions for failing to join."
Published by Globes, Israel business news - en.globes.co.il - on June 7, 2021
© Copyright of Globes Publisher Itonut (1983) Ltd. 2021