U.S. Treasury Proposes New Plan to Enforce 15% Global Minimum Corporate Tax

• The U.S. Treasury on Monday proposed a new mechanism to comply with and enforce a 15% global corporate minimum tax agreed to last year by 136 countries, partly by denying deductions for taxes paid in jurisdictions with lower rates. 
• The new Undertaxed Profits Rule proposed as part of President Joe Biden's fiscal 2023 budget plan would replace the current U.S. Base Erosion Anti-Abuse Tax (BEAT) with a new system that would act as a "top-up tax" to ensure that multinational corporations pay an effective tax rate of at least 15%, the Treasury said in budget documents released on Monday. The Treasury said in its revenue proposals that the undertaxed profits rule would apply to entities with more than $850Mn in global annual revenue in at least two of the last four years. 
• The global minimum tax deal negotiated through the Organization for Economic Cooperation and Development (OECD) is aimed at ending a downward competitive spiral of corporate rates and an erosion of government revenues while denying advantages to tax-haven countries. 
• A key feature of Treasury's proposed rule is that it would generate additional revenue by denying deductions to companies to the extent that they are paying a tax rate below 15%.

(Source: Reuters & Financial Post)