Fitch Says Global Minimum Tax Not Primary Credit Risk For U.S. Non-Financial Businesses

(Reuters) – A landmark agreement from 136 countries to impose a uniform minimum aggregate corporate tax of 15% carries no major credit risk for U.S. non-financial corporations, rating agency Fitch said on Tuesday.

The multilateral agreement reached last Friday, fueled by the desire of world leaders to limit tax evasion by multinational companies, is expected to come into force in 2023.

Changes in tax laws resulting from the deal may not necessarily result in higher cash tax payments, due to exemptions, tax credits and the ability of issuers to defer tax expenditures, Fitch said. in a note.

In addition to passing the 15% corporate minimum tax, the agreement will partially reallocate the taxing rights of large, highly profitable companies to countries where they sell products and services.

In turn, the deal forces countries to remove unilateral digital services taxes (DSTs) that have largely targeted US tech giants. It also bans new digital royalties until the agreement enters into force or by the end of 2023.

Negotiations to remove existing digital services taxes after the agreement are expected to ultimately end the threat of tariff wars between the United States and several countries over the levies, U.S. Treasury officials said on Tuesday.

The growing prospects of a global minimum corporate tax rate becoming a reality could cause multinational companies to reconsider their legal structures and capital investments, Fitch said, adding that there was no guarantee that it would be accepted by lawmakers in the United States, where there is weak bipartisan support for any form of tax increase.

Multinational companies with large foreign revenues might prefer a global minimum tax instead of a disparate fiscal patchwork across countries because a universal set of rules provides greater clarity for business planning, Fitch said.

Report by Kanishka Singh in Bengaluru; Editing by Paul Simao

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