The global minimum tax, or GMT, is one of the most significant changes to international taxation in a century, having now been backed by over 130 countries. Nevertheless, there is still some lack of clarity on what this change may mean for private sector projects financed by multilateral development banks, or MDBs.
Under the GMT, in-scope multinational enterprises, or MNEs, will be subject to a minimum 15% tax rate from 2023. The GMT is expected to generate an additional $150 billion in global tax revenue each year and increase and protect the tax revenues of low- and middle-income countries.
For those MDBs that are scrutinizing the ownership structures and tax affairs of groups they invest in, the GMT will likely become a factor in due diligence processes. The GMT may not directly apply to groups they are investing in in emerging markets due to quantitative limitations, but it could still impact MDB financing indirectly through larger investment partners and due diligence processes that assess economic substance, treaty shopping, and effective tax rates.