The European Commission (EU) has supported US Treasury Secretary Janet Yellen’s demand for a global minimum corporate tax. However, she said its rate should be decided after talks in the Organization for Economic Cooperation and Development (OECD). Yellen is currently working with G20 countries to agree on a global corporate minimum tax rate.

The US plan envisages a 21 per cent minimum corporate tax rate, coupled with eliminating exemptions on income from countries that do not enact a minimum tax to discourage the shifting of jobs and profits overseas. The OECD has long been working on two-tier global taxation scheme that would tax companies where they make profits even if they do not have a physical presence there.

The second tier of the OECD scheme aims to establish a global minimum tax rate, which could apply to all companies, not only digital ones, so that governments do not compete with each other offering lower taxes to attract large multinational firms.

The EU's attempts to unify even what companies are taxed on, rather than setting a common tax rate, have been stalled since 2011 because taxation is a jealously guarded prerogative of national parliaments and often forms a key part of a country's economic model.