Inside Politics

Global tax deal under pressure

Friday, October 29th, 2021 00:00 |
Climate change. Photo/Courtesy

The civil society yesterday called for the rejection of the OECD/G20 Global Tax Deal – a controversial tax arrangement they say will have an irreversible debt burden on African countries.

Kenya is one of the four countries that have expressed reservations in backing the push for a global minimum corporate tax rate on multinational companies.

Nigeria, Pakistan and Sri Lanka are also yet to join the deal which lobbyists believe tilts in favour of developed countries.

Global minimum tax

The global minimum corporate tax rate of 15 per cent meant to go where multinationals are headquartered, the organizations have argued will exclusively benefit wealthy nations and that the move is inadequate in meeting the challenges of post-Covid 19 recovery efforts.

“In addition, Pillar Two’s 15 percent tax rate is unfavorable given that many multinationals have been growing their wealth in economies that have been hit hard by the COVID-19 pandemic and climate change,” stated a statement endorsed by South Africa’s Alternative Information & Development Centre, Tax Justice Network Africa and the African Forum and Network on Debt and Development.

Further the activists added that fixing a global minimum corporate tax rate at just 15 percent will not only negatively impact African countries’ debt obligations, but the deal also goes against the views of at least 25 African countries that are not members of the OECD inclusive framework.

The deal will see Kenya for instance, drop its own digital services tax plan which came into effect at the start of January but was protested in a High court ruling terming it unconstitutional.

It is expected that such a commitment will ensure big companies pay a minimum tax rate of 15 per cent and make it harder for them to avoid taxation.

The deal has been agreed by 136 countries, according to the Organisation for Economic Cooperation and Development.

“Conveniently, the capitals of rich nations will benefit. Developing countries from which these profits are often extracted and which need the revenue the most to finance development and public services have been left out,” read a statement which comes just a day before the G20 heads of State and Government meet is held.

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