The global minimum tax in times of climate crisis


For the first time since 1928, the fundamental rules of international taxation will change. The leaders of global tax reform, under the governance of the OECD, have fulfilled their mandate to set a global minimum tax of 15%, accepted by 136 countries and jurisdictions, in which 90% of global economic activity is carried out. On October 30, 2021, representatives of the OECD will return to the G-20 in Rome to conclude this tax deal.

This global minimum tax constitutes a historic reform, which modifies the bases of international taxation and marks the course of globalization.

At the same time, leaders will meet in Glasgow for COP 26, dubbed the “last chance” conference on climate change. This will be the 26th meeting since COP 1 in Berlin in 1995, during which countries will seek to reach general consensus on reducing greenhouse gases, or GHGs.

However, these two world events are discussed and negotiated in isolation, without any point of attachment. Even as the global climate crisis threatens our home, planet Earth, this tax reform does not include environmental attribution. Freshwater scarcity, loss of agricultural productivity, land desertification and sea level rise will lead tens of millions of climate migrants to seek a viable living space, whether in their own country or perhaps elsewhere. It has already started.

New international tax rules, which should mark the next decades, are emerging and we must try to link them to the efforts of all countries to counter the effects of the climate crisis.

The global minimum tax is certainly showing some success, but a third of the world’s nations have yet to join the initiative, leaving nearly two billion people excluded from the deal. Several of these countries, including the Philippines, Pakistan, Nigeria, Sri Lanka, Sudan, Yemen, Zimbabwe, Madagascar, Mozambique, Myanmar, Kenya and Fiji, are already grappling with an environmental emergency. unprecedented in the history of mankind. However, we have learned that the target of $ 100 billion in annual aid, from rich countries, the main polluters, to poor countries to help them cope with the climate crisis, will be postponed for two years.

Negotiating an agreement that correlates the minimum tax with climate change could prove to be a major incentive for these non-signatory countries, to convince them to join this global tax deal. Where tax reform finds its limits, concern for the environment can serve as a persuasive force.

A coordinated initiative that could bring international taxation into line with the climate crisis could be the earmarking of 1% of global minimum tax revenues, estimated at $ 150 billion per year, to create a Global Climate Refugee Fund.

In addition, the experience gained in setting an overall minimum tax, negotiated and agreed upon in just three years, could well serve as a basis for negotiating a consensual mode of global GHG taxation.

This method of taxation would not require the adhesion of all countries to enter into force. Thus, if a country of origin of the emissions does not collect the tax on GHG emissions, the country of residence of the polluter would be allowed to do so.

Regardless of how it is decided to proceed, it is now vital that all forces unite to stem the effects of the climate crisis, which has reached a critical level. The time to approach our global problems in silos is well and truly past.

This column does not necessarily reflect the opinion of the Bureau of National Affairs, Inc. or its owners.

Author Info

Brigitte Alepin is a Canadian tax expert who has practiced for 30 years and is now a professor of taxation at the University of Quebec in Outaouais. She is the co-founder of TaxCOOP, director of the movie “Fast & Dangerous Race to the Bottom” and co-writer of the movie “The Price We Pay”. “Fast & Dangerous Race to the Bottom” recently won the Outstanding Achievement award at the Best Shorts Competition 2020 Humanitarian Awards.

Lyne Latulippe is professor of taxation at the University of Sherbrooke in Quebec, Canada. She is a principal researcher at the Chair in Taxation and Public Finance at the University of Sherbrooke.

Louise Otis is the President of the Administrative Tribunal of the Organization for Economic Co-operation and Development, or OECD. She is also president of the Court of Appeal of the International Organization of the Francophonie, or IOF. She is a member of the Administrative Tribunal of the European Organization for the Exploitation of Meteorological Satellites, or EUMETSAT. Otis was appointed by the United Nations Secretary-General to a panel of 5 independent international experts in charge of overhauling the United Nations administration of justice system. It has created a transitional justice system for countries affected by armed conflicts and / or environmental disasters.

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