OECD says 130 countries agree to minimum 15 percent corporate tax rate

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A total of 130 countries have agreed on a global tax reform that will ensure multinationals pay their fair share wherever they operate, the OECD said on Thursday, but some EU countries declined to join.

The Organization for Economic Co-operation and Development said in a statement that global companies, including US giants Google, Amazon, Facebook and Apple, would be taxed at a rate of at least 15 percent once the deal is implemented.

The new tax regime should add approximately $150 billion (€125 billion) to the state treasury worldwide.

“The framework updates key elements of the age-old international tax system, which is no longer fit for purpose in a globalized and digitized economy of the 21st century,” the OECD said.

The formal agreement follows an endorsement by the G7 group of rich countries at a meeting in Britain last month. Negotiations are now moving to a meeting of the G20 group of developed and emerging economies on July 9-10 in Venice, Italy.

US President Joe Biden said the latest deal “puts us a striking distance from a full global agreement to end the race to the bottom for corporate taxes.”

US Treasury Secretary Janet Yellet called it “historic.”

Germany, another tax reformist, praised it for taking a “colossal step toward tax justice”, and France said it was “the most important tax deal in a century”.

British Chancellor of the Exchequer Rishi Sunak, whose country currently holds the G7 presidency, said: “The fact that 130 countries around the world, including the entire G20, are now on board marks a further step in our mission to global tax reform”.

French Finance Minister Bruno Le Maire said at a press conference: “I welcome this huge step. It is the most important international tax deal reached [in] a century”.

‘In everyone’s interest’

But the European Union’s low-tax countries, Ireland and Hungary, refused to agree to the agreement reached in the OECD framework, the organization said, highlighting ongoing divisions over global taxes.

Both countries are part of a group of EU countries, including Luxembourg and Poland, that relied on low tax rates to attract multinationals and build their economies.

Ireland, home to tech giants Facebook, Google and Apple, has a corporate tax rate of just 12.5 percent.

Irish Finance Minister Paschal Donohoe has warned Ireland could lose 20 percent of its business income under the new rules.

Nine of the 139 participants in the talks have so far not signed the agreement.

But China, whose position has been closely watched as it offers tax breaks to key sectors, approved the agreement.

“It is in everyone’s interest that we reach a final agreement between all members of the Inclusive Framework later this year,” said OECD Secretary General Mathias Cormann.

“This package doesn’t eliminate tax competition, as it shouldn’t, but it does set multilaterally agreed restrictions,” Cormann said, adding that “it also caters to the various interests at the negotiating table, including those of small economies and developing economies.” jurisdictions.”.

‘More just’ world economy

Finance chiefs have characterized a minimum tax as necessary to stop competition between countries over who can offer multinationals the lowest rate.

For Biden, a global tax deal will help maintain U.S. competitiveness as he has proposed raising domestic corporate taxes to pay for an infrastructure and jobs program with a price tag of about $2 trillion.

Biden praised an “important step in advancing the global economy to be more just for workers and middle-class families in the United States and around the world.”

He noted that the countries that have signed up make up more than 90 percent of the global economy.

The OECD statement said the package will “provide much-needed support to governments that need to generate the necessary revenue” to set their budgets and invest in measures to support the post-Covid recovery.

An implementation agreement is scheduled for October, it said.

( Jowharwith AFP, REUTERS)