Kuwait partners with OECD to combat global profit shifting

This news has been read 915 times!

KUWAIT CITY, Nov 22, (Agencies): The Organization for Economic Co-operation and Development (OECD) has declared Kuwait’s entry into the Comprehensive Framework Agreement on Tax Evasion and Profit Shifting (BEPS) and its active participation in addressing tax challenges stemming from the digitalization of the economy. The term BEPS, denoting the erosion of tax bases and profit shifting, pertains to tax planning strategies employed by multinational companies exploiting legal loopholes and mismatches in tax rules to evade taxes.

Emphasizing international cooperation, the organization highlighted Kuwait’s collaboration with over 140 member states and the G20 in combating tax evasion and profit transfer. Kuwait’s commitment, through its membership in the agreement, extends to addressing the tax challenges arising from the digital economy. The agreement, comprising two pillars designed to reform international tax rules, ensures equitable tax contributions by multinational companies in the countries they operate.

Kuwait’s involvement includes implementing a comprehensive framework package for tax evasion and profit transfer, featuring 15 measures aimed at addressing tax evasion, enhancing international tax rule coherence, and fostering a transparent tax environment.

The first pillar of the agreement seeks to achieve a fairer distribution of tax rights to major multinational companies, anticipating the allocation of tax rights on approximately $200 billion in global profits annually. This redistribution is anticipated to yield annual gains in global tax revenues ranging between $17 billion and $32 billion, based on 2021 data, with developing countries benefiting more than their advanced economy counterparts.

The second pillar establishes a global minimum tax rate of 15% for multinational companies. The application of this new minimum tax on corporate profits is projected to exceed 750 million euros, potentially resulting in annual global gains amounting to $200 billion. Additional benefits include tax system stability, increased taxpayer awareness, and improved global tax revenues. The recently issued text of a multilateral agreement on tax evasion aims to expedite the signing, ratification, and coordinated implementation of this fundamental reform.

The OECD reported that the Multilateral Tool to Implement Global Minimum Special Taxes of Common Rules, open for signing on October 2, 2023, is designed to protect the rights of developing countries’ governments. This tool ensures that multinational companies pay minimum taxes on a wide range of financial services and cross-border payments in the future.

This news has been read 915 times!