One hundred and thirty-six countries have agreed to impose a minimum tax of 15% on multinational companies, the Organization for Economic Co-operation and Development announced on Friday, after the Ireland, Estonia and Hungary rallies.
“The major reform of the international tax system completed today in the OECD will ensure that a minimum tax rate of 15% is applied to multinational corporations from 2023,” the OECD said in a statement, and welcomed the “historic” agreement. These 136 countries, which account for 90% of global GDP, will be able to generate approximately C$216.5 billion in additional revenue thanks to this minimal tax, the organization asserts.
Kenya, Nigeria and Sri Lanka, which are linked to the negotiations involving 140 countries, are not among the signatories. Pakistan, which was included in the previous list of signatories, is no longer on Friday’s list.
US President Joe Biden said in a statement that “strong global minimum taxes will allow this.”[it] and finally balancing competition terms for workers and taxpayers.” European Commission President Ursula von der Leyen welcomed the “big step forward to make our tax system fairer.” The French Economy Minister, Bruno Le Maire, spoke of a “great and decisive achievement,” saying that He wants to translate it into legal action during the French presidency of the European Union, in the first half of 2022.
The agreement was welcomed by the CCIA, a lobby group for US tech giants, which insisted in particular that it was satisfied with “a clear commitment to abolish all tax measures on digital services” and a “commitment not to introduce measures in the future.” Facebook’s Vice President of International Affairs Nick Clegg also confirmed that the social network was “happy to see a consensus emerge,” even if “it could mean paying more taxes in different places.”
The first agreement on international tax main lines was found in July. This time, it was a question of setting technical standards, but it was the subject of bitter negotiations between countries with highly diverse national tax strategies.
The main lock jumped 15% on Thursday with the rise of Ireland and then Estonia, two countries that until then had been reluctant to affix their initials to text.
For Dublin, home to the European headquarters of Apple, Facebook and Google, a 15% flat rate guarantee was crucial. The July agreement stipulated “at least” 15%, leaving the door open for an increase.
Hungary, the last EU country not to back down, joined the deal on Friday after securing concessions. Budapest, which has a 9% corporate tax and is one of the states focusing on tax attractiveness, has been able to see increased deductions that will allow it to account for the tax base of multinational corporations.
The other big part of the negotiations in the OECD was about the share of tax revenue to be redistributed in countries where multinational corporations have activities and clients, but no head office. This only pertains to very large groups that record over $29 billion in trading volume each year and that show high profitability. The share of taxable profits in this context, the subject of a smart calculation, is set at 25% above the profitability level of 10%.
If the agreement is presented as historical, it has been viewed by NGOs and some economists as not ambitious enough and a source of inequality between rich and developing countries.
According to Oxfam, the poorest countries will get back less than 3% of the extra tax revenue. The NGO denounced “counterfeiting” and “capitulation” towards countries with lower tax rates. “It will mainly benefit the United States and Europe,” Daniel Boone, head of international projects at the Tax Foundation in Washington, told AFP in Washington. Because multinational corporations “home their head offices and most of their clients there.”
Joseph Stiglitz, the Nobel Prize winner in economics, who has called for a minimum tax of 25%, lamented Thursday that the agreement “does not adequately address the concerns of developing and emerging countries.”
The goal is to implement the reform by 2023, which is the time to adapt the legislation. But some questions remain unanswered, such as the administration’s ability to impose reform on Congress.
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