Brazil prepares 15% minimum tax ahead of G20 presidency

2023 11 09T103514Z 1 LYNXMPEJA80BU RTROPTP 4 BRAZIL ECONOMY G20 scaled
FILE PHOTO: Prime Minister of India Narendra Modi, Brazil President Luiz Inacio Lula da Silva, U.S. President Joe Biden and UK Prime Minister Rishi Sunak visit Raj Ghat memorial with other G20 leaders, Sept. 10, 2023, in New Delhi. Kenny Holston/Pool via REUTERS/File Photo

Brazil is planning to roll out a minimum 15% tax on profits of multinational corporations as it gears up to assume the presidency of the Group of 20 nations in December, a senior Finance Ministry official told Reuters.

The planned move would help Brazil align with the G20‘s agenda to combat tax evasion in an increasingly global and digital economy, said Tatiana Rosito, the secretary of international affairs at the ministry.

“The revenue service is already organising the implementation of this minimum taxation on multinationals,” she said in an interview on Wednesday.

The revenue service did not immediately respond to a request for comment.

The Organisation for Economic Cooperation and Development (OECD) released a handbook on the subject in October under the Indian presidency of the G20. It advocates that this mechanism will ensure that large multinational companies pay a minimum 15% tax on their profits in all jurisdictions where they operate to deter profit-shifting to tax-favourable locations.

The OECD estimates that the global minimum tax, already under way in countries including South Korea and Japan, could generate up to $200 billion in additional annual revenue.

According to tax experts, the impact of the new rule will hinge on the structure proposed by the revenue service, as Brazil‘s corporate income tax already reaches 34%, which is more than double the minimum threshold specified in the global agreement.

“We have an exchange rate policy that encourages foreign companies to establish themselves in the country, and here, corporate taxation is already high,” said Maria Carolina Sampaio, partner and head of the tax department at the law firm GVM Advogados.

During its G20 presidency, Brazil will also support the OECD’s guidance for countries to implement taxation on the digital economy, said Rosito, a topic that faces resistance from countries like the United States, home to major big tech companies.

However, she acknowledged there is no final agreement as yet for universal adoption of this pillar. Its implementation is complex and requires technical assistance to determine how much can be taxed in each country, she added.

She also said Brazil aims to go further in the global tax discussion to reduce differences between advanced and emerging economies and to promote the green agenda.

“One of Brazil‘s key messages to the G20 is that this massive global mobilisation of resources for ecological transition stems from a new relationship between the public and private sectors,” she said, adding that developed countries are already providing substantial subsidies and incentives.

“If the world doesn’t recognize the need for these incentives to be globally calibrated, it risks creating a new cycle of global economic divergence.”

According to Rosito, Brazil will seek to mobilise multilateral banks to reduce bureaucracy in project evaluations, and create mechanisms to offer guarantees and insurance for long-term projects, also aiming to minimize currency risks.

Another historical stance is advocating for greater representation of emerging countries in multilateral organisations.

She mentioned that, as leader of the G20, Brazil will continue pursuing the realignment of shareholding at the International Monetary Fund (IMF), even if it is not done simultaneously with the increase in quota resources to be voted on later this year.

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