Saudi Arabia: The 15 percent minimum tax rule put forward by the Organization for Economic Cooperation and Development should be implemented on multinational companies in every jurisdiction, according to the managing director at KPMG US.

In an exclusive interview with Arab News on the sidelines of the Zakat, Tax and Customs Conference in Riyadh on Feb. 8, Alistair Pepper said that global firms should pay their fair share of tax wherever they do business.

“Pillar two of the OECD’s global tax agreement is focused on introducing global minimum effective tax rules. So, this is ensuring that large multinational companies that are in scope of these rules will pay a minimum level tax of 15 percent in every jurisdiction where they operate,” said Pepper.

Pepper noted that countries like South Korea and Japan have also made announcements regarding levying global minimum effective tax rules for multinational companies operating in these nations.

“What these countries are really saying is that we want to ensure that multinational companies that operate in our jurisdictions and other jurisdictions are paying effectively their fair share. And we think the fair share is 15 percent minimum tax across the board,” Pepper told Arab News.

During the interview, Pepper pointed out that higher domestic tax rules should be implemented in countries very carefully, as it will negatively impact the rate of investments in those nations.

“You also want to think about other economic factors. Obviously, higher taxes are going to place pressure on investments. So, you might want to think about other policy measures that are available to you to stimulate investments,” Pepper added.

Talking about the corporate taxation system in Saudi Arabia, he said: “For Saudi Arabia, the question is really: ‘Do I want to introduce or change my current tax rules, such that multinationals operating in my country always pay a 15 percent minimum tax rate?’ ‘Do I want to introduce a domestic minimum tax that tops them up to that rate?’”

During the World Economic Forum in January, Saudi Arabia’s Minister of Economy and Planning Faisal Alibrahim said that the Kingdom “broadly supports” global tax reforms, such as those tabled by the OECD.

In 2021, almost 140 countries agreed to sign up to the OECD tax reform deal, which aims to ensure multinational firms pay their fair share of corporate tax and prevent climate tax evasion.

Alibrahim said that despite some minor issues, the Kingdom regarded the OECD’s reform efforts as a “step in the right direction” as they were “underpinned by fairness.”

The minister further pointed out that it was also important that countries adhered to the time frame for the implementation of the OECD agreement, which was set as the start of 2024.