SEATINI Uganda and TJNA Hold Multi-Stakeholder Dialogue on the Global Minimum Tax Rate:
In June 2021, the finance ministers of the rich countries of the G7 reached a deal that would have a ‘seismic’ impact on the global tax framework. As part of the deal, a global minimum tax rate of 15% was agreed upon. Despite calls by civil society to reject this deal, it was later backed up by the G20 countries. Further, 130 out of 139 jurisdictions of the Organization for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) endorsed the deal on 9 July 2021 setting a global minimum tax rate of 15% on multinationals with more than $890 million in revenue with the exceptions of financial companies and “extractives” such as oil companies. This decision, which is part of the two pillared plan to address global tax challenges was intended to end global competition to offer the lowest corporate tax as well as stopping multinational corporations from shifting their profits to low-tax countries.
On 3rd November 2021, SEATINI Uganda and Tax Justice Network Africa organized a multi-stakeholder dialogue under the “OECD/G20 Inclusive Framework Decision on The Global Minimum Tax Rate: Another onslaught on Uganda’s Taxing Rights?”
This dialogue brought together stakeholders including representatives from Government Ministries, Departments and Agencies, Civil Society Organizations, Members of Parliament, Private Sector and the media.
During his presentation, Mr Francis Kairu from Tax Justice Network Africa highlighted that the Global Minimum Tax Rate (15%) is the tax rate that OECD/G20 is pushing to be adopted globally forby multinational companies. He further reiterated that Civil Society Organizations reject the 15% Global Minimum Tax Rate 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.
‘‘Only about 20 few MNCs will be eligible for the tax and that the current threshold is set at EUR 20 billion. 56% (28) of African countries are not part of the OECD inclusive framework and were not consulted or involved in the negotiations,’’ he said.
Mr Robert Luvuuma, Manager Large Taxpayers Office, Uganda Revenue Authority emphasized that the Global Minimum Tax Rate wouldn’t be a problem but the rules around it make it problematic.
Participants at the dialogue observed that for some many years, Multinational corporations (MNCs) have been engaging in profit shifting and in addition to not paying their fair share of taxes, they have quickly endorsed the 15% Global Minimum Tax rate. It was further emphasized that there are MNCs engaging in dubious schemes to ensure that they don’t pay taxes.
The dialogue revealed that corporations most often negotiate stabilization clauses to ensure that even when countries change their laws, the contracts signed with the government allow them to operate even under a different regime.
Participants further cautioned that if governments are not careful about the tax incentives they doling out, countries will continue losing the much needed revenue.
The issue of tax expenditures was cited as a huge concern over the years and just recently, countries including Kenya and Uganda published tax expenditure reports.
At the end of the dialogue, there was consensus on the need to undertake research and to mobilize other CSOs inorder to have a common position.