Critics say the idea of an internationally agreed minimum corporate tax rate amounts to a sort of cartel. Defenders argue that it limits the ability of multinationals to arbitrage different countries' tax rules and not pay their "fair share" of tax.

A global push to set a 15 per cent corporate tax floor around the world – designed to discourage firms from shifting to low-tax jurisdictions – is hitting a set of obstacles, such as weak margins for the ruling Democrat Party in Congress and objections from countries such as Hungary, media reports say.

More than half a year after almost 140 countries agreed to impose a minimum tax on large companies – a proposal led by US President Joe Biden – there is little progress on adopting the rules at national level, the Wall Street Journal noted (June 26). Biden's administration had bid to raise the US corporate tax rate from its current 21 per cent rate to as much as 28 per cent. (Under the Trump administration, the corporate rate was slashed from 35 per cent, when it had been one of the highest in the developed world.)

The WSJ said Hungary’s decision to withdraw its support for the minimum tax means that the European Union can’t press ahead with its plans for 2024 implementation, even though the bloc’s other 26 members support the move. (Hungary is a EU member.)

France, one of the most enthusiastic supporters of a minimum corporate tax, has sought to put pressure on Hungarian Prime Minister Viktor Orbán about the country’s stance on the matter.

The idea of a minimum tax rate clashes with the idea that countries can compete with one another over being low-tax jurisdictions. Ireland (an EU member) had an 11 per cent corporate tax rate, attracting businesses such as Amazon. Under its imputed dividends regime, the Mediterranean island of Malta (a EU member), has been able to attract corporates with low actual rates. Defenders of these low rates say that a minimum rate order amounts to a form of tax “cartel” for the benefit of high-tax nations.

The matter is relevant for wealth managers and clients because many high net worth and ultra-HNW individuals have operating businesses and stakes in large corporates; hence they would be indirectly affected by a shift to a minimum tax system. Also, the idea of imposing such a minimum rate could set a precedent for other taxes. The UK, ironically, agreed to the minimum corporate rate regime, even though one of the purported points of it leaving the EU was regaining freedom to set its own tax rates.