Biggest US Firms Largely Unscathed by Global Minimum Tax, So Far

The new 15% global minimum tax that became effective in almost 40 countries is barely having an impact on many of the 100 largest US companies so far, but it has prompted low-tax jurisdictions to raise their corporate tax rates.

An analysis of data collected by Bloomberg Tax from the latest S&P 100 earnings statements showed that just four of the companies on the index—Bristol Myers Squibb Co., Johnson & Johnson, Merck & Co., and RTX Corp.—reported material impacts from the global minimum levy.

The Boeing Co., Ford Motor Co., Johnson & Johnson, NVIDIA Corp. and Bristol Myers Squibb Co. declined to comment for this story.

Abbott Laboratories Inc., FedEx Corp., Merck & Co., Pfizer Inc., RTX Corp., and Starbucks Corp., did not respond to requests for comment.

The minimum tax became effective in January. The data collected doesn’t show the full effects of the tax, also known as Pillar Two, but it does raise questions about how countries and the OECD will gauge the policy’s success.

“Evaluating the success of Pillar Two is challenging because of its nature as an anti-abuse rule,” said Chad Hungerford, Deloitte’s Pillar Two leader. “The purpose of Pillar Two largely isn’t to raise revenue. It’s to end the race to the bottom and tax competition between countries,” he said.

But, he added, corporate taxpayers should see a “gradual creep” in their effective tax rates.

“If that doesn’t happen, I think it will look like it has failed,” Hungerford said.

A quarter of the S&P 100 companies said the tax wouldn’t have a material impact on their tax rates—including Boeing Co., FedEx Corp., and NVIDIA Corp.—and 35 companies on the list said they “may” be impacted by the global minimum tax in the future and will continue to monitor any tax policy changes in their areas of operation around the globe.

The remaining 36 corporations didn’t mention the tax in their filings.

In a statement to Bloomberg Tax, Director for the OECD’s Center for Tax Policy and Administration Manal Corwin said the impact of the global minimum tax is expected to build “over time.”

“This is not only due to the rate at which the rules are adopted and the effect of transitional rules and safe-harbours, but also due to behavioural changes from MNEs (which can occur gradually or in anticipation of legislative changes) as they restructure their supply chains and dismantle some of the tax planning structures,” she said, referring to multinational enterprises.

The success of the policy can’t be measured just by taking into account “data from a subset of MNEs in the first few months of its implementation,” she said.

Corwin added that another criteria to assess the impact of the global minimum tax is the way countries “collect and deploy” tax revenue because they won’t feel pressure to “give away wasteful revenue through wasteful incentives.”

The 15% global minimum tax is part of a larger international tax deal agreed to in 2021 by over 140 countries—not yet including the US—at the Organization for Economic Cooperation and Development. The complex and voluminous rules seek to impose the levy on multinational companies in each country where they operate.

The OECD has estimated the global minimum tax will bring governments an additional $155 billion to $192 billion per year.

Interactive graphic: Only four companies in the S&P 100 have reported material impacts from the global minimum tax

Full Impact Not Felt

The early data on company impact isn’t surprising. Companies aren’t feeling the full effects of the global minimum tax because many countries have yet to apply their global minimum tax laws. In addition, temporary safe harbors that delay use of the full minimum tax rules are still in effect, and US tax on foreign earnings is factored in to global minimum tax calculations.

Still, companies haven’t been sounding the alarms about spikes in tax bills looming in the future, according to Cathy Schultz, vice president of tax and fiscal policy at the Business Roundtable.

Many companies have said they expect to pay more to tax advisers for the additional compliance than in taxes to countries.

“I’m not hearing anybody say, ‘Oh, we’re going to owe billions of dollars.’ None of that,” Schultz said.

To be sure, that doesn’t mean the tax has definitively failed.

Revenue does matter, according to Michael Plowgian, principal at KPMG and former deputy assistant secretary for International Affairs at the Treasury Department—but it’s not the whole story.

Ending tax competition—a situation in which countries compete for outside investment to lower, or even eradicate their corporate tax rates—is “hard to show,” said Plowgian, and just the fact that low-tax countries are adopting the global minimum tax rules could be seen as a success, he added.

Countries traditionally considered “tax havens” such as Bermuda, Bahamas, Barbados, the Island of Jersey, Ireland, Singapore, and Switzerland have each adopted or are considering adopting a version of the global minimum tax.

‘Slow Burn’

Schultz noted that corporations will have a clearer picture of the impact at the start of next year, when companies pay their tax bills on income they made in 2024.

Hungerford described the effects of Pillar Two on companies as a “slow burn”—a situation in which a series of factors compounded over the next three or four years will have a long-term impact on companies’ effective tax rates and bills.

One of those factors is the phasing out of the so-called “country-by-country safe harbor,” a transitional measure meant to ease the compliance burden on companies calculating their effective tax rates.

The safe harbor allows corporate taxpayers to use information they already collect for so-called “country-by-country” reports they give to tax authorities to prove they owe zero top-up tax in a jurisdiction. The safe harbor expires after 2026.

Under the safe harbor, Hungerford said companies can do more tax planning than under the full-blown Pillar Two calculations.

“The biggest impact you’ll see is when we get out of the transitional safe harbor,” he said.

If companies were required to use the Pillar Two model rules to calculate their global minimum tax liability on day one, Hungerford said, “we would’ve seen a big jump” in effective tax rates and tax expenses.

Hungerford explained the Pillar Two model rules, or GLoBE rules, have a number of “key provisions” that the country-by-country safe harbor does not. For example, the safe harbor allows companies to pick and choose what books and accounting standards they use on a country-by-country basis. This flexibility allows companies to lower their chances of paying top-up tax.

“GLoBE gets much, much more detailed and has a lot more of the anti-abuse flavor baked into it.”

US Minimum Tax: GILTI

The top US companies are already paying a minimum tax on global intangible low-taxed income, or GILTI.

Tax on GILTI was passed as part of the 2017 Tax Cuts and Jobs Act and signed into law by former President Donald Trump. Under the levy, companies that own 50% or more of a foreign corporation pay an averaged minimum tax rate between 10.5% and 13.1% to the US government on foreign income.

The minimum GILTI rate is expected to increase to around 16% in less than two years.

Under the global minimum tax rules, the US GILTI rate is “pushed down” from the parent entity to the subsidiaries operating in foreign countries with tax rates below 13.1%. In effect, the push-down rule lowers the amount of top-up tax a company pays.

However, these rules only apply to tax years 2024 and 2025.

Peter Barnes, of counsel at Caplin and Drysdale, said US companies won’t be hit with large global minimum tax bills because they’re already getting taxed well above 15% in their top foreign markets.

Barnes pointed to countries in Europe, as well as the UK, Japan, Australia, and China that have corporate tax rates at or above 20%. The EU, UK, Japan, and Australia have each adopted the Pillar Two rules.

UK Companies Report Little Impact

UK-based companies say that they won’t see a large impact on their tax bills and rates.

A survey by His Majesty’s Revenue and Customs of nearly 600 tax directors published in late July said most UK businesses expect a considerable administrative burden from Pillar Two, but little or no impact on their tax bills.

For some it was because activities in low-tax jurisdictions only accounted for a very small proportion of their revenue or because low-tax jurisdictions where they had operations had signed up to Pillar Two.

Others were part of foreign-owned group, and it was their parent entity that would be affected from a tax perspective. As a consequence of the expectation that Pillar Two would have little effect on the amount of tax they pay in the UK, most did not envisage a requirement to make structural changes.

Where companies may feel the sting, Barnes added, is in traditionally low- or no-tax jurisdictions like Ireland and Singapore that have adopted or will adopt global minimum tax rules.

“There may be real revenue there, but other than that, I don’t think there’s going to be a lot of sort of new revenue flowing into a lot of countries,” he said.

The tax office said last November it expected to collect around £12.7 billion ($16.75 billion) over six years from the global minimum tax. For perspective, the UK collected £829.1 billion in taxes from 2023 to 2024.