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News Article

Minimum MNE Tax To Arrive in 2023; Is Mexico Prepared?

By Sofía Hanna | Thu, 10/21/2021 - 13:09

Two weeks ago, the OECD announced a minimum tax rate for companies worldwide that would relocate multi-billion investments. Its application would bring both challenges and benefits for companies in Mexico at a crucial time in the country’s recovery from the pandemic.


OECD’s resolution means a minimum tax rate of 15 percent that will be applied by 2023, as reported by MBN. This deal involves 136 countries and jurisdictions representing more than 90 percent of global GDP. The deal would reallocate over US$125 billion in profits from around 100 of the world’s largest and most profitable multinational companies to countries worldwide. “Developing country revenue gains are expected to be greater than those in more advanced economies, as a proportion of existing revenues,” according to the OECD. Four countries have not yet joined this agreement: Kenya, Nigeria, Pakistan and Sri Lanka.


The impact of this measure on Mexico’s economy is yet to be seen. The country’s tax system ranks among the least competitive in the OECD. Mexico’s tax collection as a percentage of its GDP amounted to 16.5 percent in 2019, significantly lower than the OECD average of 33.8 percent and Latin America and the Caribbean’s 22.9 percent. Most of Mexico's tax revenue comes from the value added tax (VAT) on goods and services tax, representing a total of 24.3 percent in 2018, according to the OECD. The second highest proportion of tax revenue in 2018 was derived from 21.3 percent corporate income tax.


The minimum tax for businesses could have complex implications in Mexico’s economy and come at a crucial moment when exports and imports of products globally have been disrupted, as previously mentioned in MBN. A significant problem affecting supply worldwide is the lack of containers, which has already increased the price of numerous products and raised concerns about future important consumer events.


The announcement brought uncertainty to both countries and companies, with some concerns that it could affect current investments at a sensitive time. Given this, Mathias Cormann, Secretary-General of the OECD, said: “Today’s agreement will make our international tax arrangements fairer and work better. This is a major victory for effective and balanced multilateralism. It is a far-reaching agreement that ensures our international tax system is fit for its purpose in a digitalized and globalized world economy. We must now work swiftly and diligently to ensure the effective implementation of this major reform.” 

The data used in this article was sourced from:  
Sofía Hanna Sofía Hanna Junior Journalist and Industry Analyst