New tax on multinationals finances Meloni’s maneuver: how does it work?

There are more confirmations than news in the update note on the economics and finance document (Nadef) presented by the Meloni government, but given the fiscal maneuver, the introduction of a new tax, the Global minimum tax, is expected. It applies to multinational companies and large national groups. In effect, the new tax implements the European Union directive of 14 December 2022, which is based on rules shared by the OECD and G20 countries and must be implemented by Italy by 31 December 2023. The new tax on multinational companies was included in one of the decrees. It depends on the tax devolution law and will have to come into force in 2024: let’s see how it works and who it concerns.

Taxation of multinationals: everyone is doing it, doing it better

The need for global tax arises with the globalization and digitalization of the economy, given the ability of multinational companies to rapidly change their business models. That’s why 135 countries around the world have decided to review international tax rules to tax the profits of digital companies and prevent them from moving their profits to places where rates are lower.

In the latest draft agreement among OECD members, the global minimum tax is expected to generate up to $200 billion in additional revenue per year. “The international community worked closely to resolve technical issues related to the historic agreement on reform of multinational taxation,” commented OECD Secretary General Mathias Cormann. The text of the Multilateral Convention provides governments with the basis for the coordinated implementation of this fundamental reform “It is part of the international tax system and represents significant progress towards the signature of the Convention. Countries now have the tools to quickly take the necessary steps for signature and ratification.”

This is what Italy is doing: So how does the Global Minimum Tax work and how much will it bring to state coffers?

Global minimum tax, tax on multinationals: How does it work in Italy?

The new tax on multinational companies is part of the tax reform-related decree and will come into force in 2024. As stated in the draft bill published on the Ministry of Finance’s website, a global minimum tax applies to “companies established and located in Italy”. “Those who are part of a multinational or national group with an annual income equal to or greater than 750 million euros”. The minimum rate on which the tax will be based will be 15 percent.

The revenue from the new tax for Italy is expected to be between 2 and 3 billion euros. Among other consequences, shared taxation at the European level should counter so-called “fiscal dumping”, the practice of lowering a country’s tax rates to attract companies and investors from abroad to the detriment of neighboring countries. Currently, corporate tax rates are below 15 percent in four EU member states: Hungary (9%), Bulgaria (10%), Ireland (12.5%) and Cyprus (12.5%).

If new resources are approved, it will be beneficial for public accounts to breathe. In Nadef, the government decided to increase the deficit by 15.7 billion euros to finance the measures included in the budget law. Apart from the Global Minimum Tax, there are no other new features: the next fiscal maneuver will confirm the existing framework by expanding the measures in place: reducing the tax wedge, introducing tax reform with the merging of the two lowest Irpef brackets, renewal Public administration and approval of healthcare and existing pensions, including Quota 103 approval of the system, renewal of the social Monkey and woman option. We will still have to wait for reforms.

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Source: Today IT

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