African lobbyists warn of 15pc global tax deal ahead of G20 Rome summit

By Steve Umidha

African Civil Society Organizations 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 rate of tax on multinational companies. Nigeria, Pakistan and Sri Lanka are also yet to join the deal which lobbyists believe tilts in favour of developed countries.

The global minimum corporate tax rate of 15 percent 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 percent 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,” reads in part a mocking statement which comes just days before the G20 Heads of State and Government is held.

The Summit is their year held in Rome, the entire weekend October 30 and 31, 2021.

Major reform of the international tax system was finalized last week in what is expected to see OECD ensure that Multinational Enterprises (MNEs) are subjected to a minimum 15 percent tax rate from 2023.

“We, therefore, call 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,” declared the group.

The landmark deal, which represents more than 90 percent of global GDP, will also reallocate more than USD 125 billion of profits from around 100 of the world’s largest and most profitable MNEs to countries worldwide, ensuring that these firms pay a fair share of tax wherever they operate and generate profits.

Following years of intensive negotiations to bring the international tax system into the 21st century, 136 jurisdictions (out of the 140 members of the OECD/G20 Inclusive Framework on BEPS) joined the Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy.

With Estonia, Hungary and Ireland having joined the agreement, it is now supported by all OECD and G20 countries. Four countries – Kenya, Nigeria, Pakistan and Sri Lanka – have not yet joined the agreement.

The two-pillar solution was delivered to the G20 Finance Ministers meeting in Washington D.C. on 13 October.