Global minimum tax also known as Global Anti-Base Erosion (GloBE) Model, provides for a coordinated and comprehensive system of minimum taxation, aimed at ensuring that large multinational enterprise groups (MNE Groups) pay a minimum level of tax on their income in respect of every jurisdiction in which they operate.

The GloBE Model Rules were released by the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) in December 2021 and are supported by a Commentary, released in March 2022. The Commentary is intended to promote a consistent and common interpretation of the GloBE Model Rules, facilitating coordinated outcomes for both tax administrations and MNE Groups.

The global minimum tax ensures that any MNE Group with annual revenue exceeding €750m will be subject to an effective tax rate of at least 15%, regardless of where its headquarters, operations, sales or profits are located.

Implementation: African Perspective

Under the GloBE rules where a tax incentive results in an effective CIT rate of less than 15%, the GloBE rules will lead to another tax jurisdiction, usually the jurisdiction of the UPE, collecting the difference between the effective tax under the tax incentive and the minimum effective tax rate of 15%. The adoption of the GloBE Rules changes the landscape of tax competition when it comes to offering tax incentives, because source jurisdictions will not be under the same pressure to provide incentives such as tax holidays, given that effective tax rates below 15% will only lead to a residence country collecting that remaining tax.

Further it is significant in reducing tax competition and the race to the bottom including through the granting of often ineffective and wasteful tax incentives. Generally, the Rules would allow jurisdictions collect top-up tax in low tax outcomes such as those generated by the granting of tax incentives, whether the constituent entity is located in countries that are IF members or not. The rules also provide for a Qualifying Domestic Minimum Top-Up Tax (QDMTT) which gives the source jurisdiction the primary taxing right on low taxed profits.



It is imperative to note that whilst implementing the Global Minimum tax will curb profit shifting, it has its nemesis on low- and middle-income countries (LMICs) especially within the African continent and these concerns have impeded the smooth support of this global deal by these LMICs. Few amongst them are;

Minimum effective tax rate

Notable amongst these concerns is the fact that the proposed minimum rate of 15% is fraught with so much weakness in its bid to stern artificial profit shifting out of Africa as most African countries have a statutory corporate income tax rate of between 25% and 35%. Thus, for this global rule to be effective within the African clime, the minimum effective rate is expected to be at least 20%. On implementation of this, the resultant effect is that Multinationals will be disincentivized from such profit shifting in Africa if all its profits are taxed at least at 20% no matter in which jurisdiction the profits are reported.

Furthermore, revenue generated by the country is sorely dependant on the minimum tax rate and it is unarguably a fact that for these LMICs in the Africa clime, difference in profit generation with implementation of 15% global minimum tax rate will be starker.

Additional Tax revenues

Moreover, a deeper challenge arises as regarding additional tax revenues which majority will go to multinationals’ home countries and not the source countries wherein these multinationals generate profit. The desire of the LMICs is that source countries should have priority in applying the minimum tax to ensure protection of their tax base. It is not out of place in the opinion of the LMICs that where priority is given to the home countries of global corporations, the acclaimed unfairness currently existing in the international tax system will seemingly be encouraged rather than being alleviated. The LMICs argues further that the developed countries receive over 60% of additional revenue relinquishing only about 40% to the remaining larger populations comprised of LMICs.

Political Economy

Notably, concerns on the tendency for political influence is a core challenge impeding implementation of the minimum tax as the market jurisdictions-which is predominantly developing countries raises the possibility for developed nations to influence the standards for international taxation as regards the minimum tax rate.

This is premised on the fact that the MNEs who have benefitted from the existing rules are mostly headquartered in developed countries. A key issue would be whether developing countries, though part of the ongoing work, could influence the desired outcome for Africa in the present as well as going forward.


It is expected that signatories to implementation of the minimum tax rate will introduce this reform in 2024 and set the ball rolling with the idea that implementation by a couple of large economies which capture a larger unit of MNE activities, will spark some domino effect where within a year going forward, the minimum tax has the desired global impact.

Further, the new global tax rules will have an impact on existing national tax incentive policies and present an opportunity for African countries to protect themselves from ceding their taxing rights to countries where multinationals are resident on existing tax incentives lower than the 15% global minimum tax, according to the new rules. This requires African countries to enact domestic minimum top-up tax legislation to tap into this revenue.


The desired goal for minimum tax rate is to curb profit shifting and curtail harmful tax competition especially as it regards the so-called ‘race to the bottom’ which has seen countries compete for investment by slashing statutory corporate tax rates and widening their offer holidays, preferential rates and other deductions. Implementing this rate with many promises is prone to being impeded within the African climes if the above challenges are not considered.

We however recommend that in considering the challenges, cognizance should be taken to the most salient ones which will not also deter the support of the developed countries as key stakeholders of this global deal.


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WTS Blackwoodstone

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