- The new minimum tax rate will apply to companies with annual revenue of more than $866 million
- The separate tax aimed at the technology giants will reallocate more than $125 billion of profits from the home countries
Image: REUTERS
Kenya is yet to commit itself to the new international tax rule setting minimum corporate tax at 15 per cent even as rich nations endorsed it in Rome at the weekend.
The East African country was not on the list of 136 countries that appended signatures to the rule seeking to block multinationals from repatriating profits to home countries.
Kenya is close early to the Organisation for Economic Co-operation and Development (OECD) bloc after signing the Multilateral Convention on Mutual Administrative Assistance in 2017.
It has, however, defied the tax rule pushed by the 38-member club.
In July, the country, alongside Nigeria and Sri Lanka pushed for 30 per cent minimum tax in a joint statement of National Treasury chiefs submitted at the G20 meeting in the UK.
They seek a tougher tax regime for global leading multinationals, accuse them of systemic tax avoidance which costs the continent $89 billion (Sh9.8 trillion) in lost revenue.
They further add that the deal does not include the views of at least 25 African countries that are not members of the OECD inclusive framework.
The new minimum tax rate will apply to companies with annual revenue of more than $866 million and would generate around $150 billion in additional global tax revenue per year.
Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could top up their taxes to the 15 per cent minimum, eliminating the advantage of shifting profits.
The poor countries have the backing of international tax justice organisations who on Saturday staged a protest at the G20 meeting.
''The commitment is inadequate in meeting the challenges of post-Covid 19 recovery efforts. Pillar One’s taxation of multinationals in countries where they sell their products and services has been watered down,'' Tax Justice Network (TJN) said.
They called on all developing nations in the global south to reject the OECD/G20’s proposal and instead support the call for a genuinely inclusive, just, and democratic process of international tax reform wherein the interests of the African continent are taken into account.
Kenyan tax expert Tom Mambo however, argues that poor countries should support the move, saying it will see them get something from giant multinationals who have not paid a cent.
''The tax proposals are welcome. This will see companies like Twitter who are doing business here with no physical offices pay taxes,'' Mambo said.
At least 136 countries mostly members of OECD have appended signatures to the deal aimed at cracking down on tax havens that have drained countries of much-needed revenue.
Finance ministers from global rich countries in July had already agreed on a 15 per cent minimum tax. Its formal endorsement at the summit Saturday in Rome of the world's economic powerhouses was widely expected.
They received a boost from the US which was pushing for a minimum of 21 per cent forced to back the plan.
The US president Joe Biden in a tweet said the policy is more than just a tax deal.
''Here at the G20, allies and competitors alike — made clear their support for a strong global minimum tax. This is more than just a tax deal - it's diplomacy reshaping our global economy and delivering for our people,'' Biden said.
The deal goes beyond setting a global rate — it also creates new rules for the digital era.
Under the agreement, technology giants like Amazon, Facebook and other big global businesses will be required to pay taxes in countries where their goods or services are sold, even if they have no physical presence there.
The separate tax aimed at the technology giants will reallocate more than $125 billion of profits from the home countries of the 100 most profitable firms in the world to the markets where they operate.