Explainer: What is a global minimum tax and how could it affect companies, countries? By Reuters – Investing.com

Explainer: What is a global minimum tax and how could it affect companies, countries? By Reuters – Investing.com

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© Reuters. FILE PHOTO: Outside view of the Organization for Economic Co-operation and Development, (OECD) headquarters in Paris

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By Leigh Thomas and David Lawder PARIS/WASHINGTON (Reuters) - Treasury Secretary Janet Yellen has thrown the weight of the U.S. government behind a push for a global corporate minimum tax rate, possibly carving a path to a long-sought deal updating international tax rules for the first time in a generation. Yellen said on Monday that she is working with G20 countries to agree on a global minimum, which she said could help end a "30-year race to the bottom on corporate tax rates." WHY A GLOBAL MINIMUM TAX? Major economies are aiming to discourage multinational companies from shifting profits - and tax revenues - to low-tax countries regardless of where their sales are made. Increasingly, income from intangible sources such as drug patents, software and royalties on intellectual property has migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries. With a broadly agreed global minimum tax, the Biden administration hopes to reduce such tax base erosion without putting American firms at a financial disadvantage, allowing them to compete on innovation, infrastructure and other attributes. The Trump