New Global Tax Agreement Loopholes Could Halve Expected Revenue, Warns EU Tax Observatory

Despite Agreeing to a 15% Minimum Rate, New Loopholes Including Tax Credits and Green Energy Subsidies May Cut Expected Tax Revenue from Multinational Corporations by Half, Leading to a Potential $134 Billion Loss in 2023 Alone.

According to the EU Tax Observatory, loopholes in the new global tax agreement are expected to cut expected tax revenue by half, potentially causing a $134 billion loss in 2023 alone. The agreement which established a minimum global corporate tax rate of 15% has been weakened by the introduction of tax credits and green energy subsidies.
As these new tax credits become more popular, multinational corporations could still manage to evade taxes, causing a significant decrease in government revenues, which could otherwise be used to fund crucial social programs and eco-friendly transitions.
Global profit shifting has resulted in almost €1 trillion in profits being recorded in tax haven countries in 2022 alone. Companies that have substantial businesses, such as factories or warehouses, operating in a particular country could continue to pay a tax rate below 15%, contributing to a 'race to the bottom' scenario.
Even though the new tax agreement was brokered in 2021 by the Organization for Economic Cooperation and Development and agreed upon by over 140 countries, it has yet to take effect. Furthermore, the finalisation of the agreement has been delayed until 2024 according to the U.S. Treasury Secretary Janet Yellen.
Finally, while the move towards green energy subsidies offers positive implications for the environment, it risks increasing wealth inequality by benefiting shareholders who are typically in the top income bracket. Despite this, the EU Tax Observatory refrains from calling for a total ban on green-technology subsidies but instead encourages governments to consider alternative policies that could offset these financial gains.