Most of the countries negotiating a global overhaul of cross-border taxation of multinationals have backed plans for new rules on where companies are taxed and a tax rate of at least 15%, they said after two days of talks.
This is a Paris-based Organization for Economic Cooperation and Development. They have hosted the talks and said that a global minimum corporate income tax of at least 15% could yield annually around $150 billion in additional global tax revenues. It said that 130 countries, that are representing more than 90% of global GDP, had backed the agreement at the talks. New rules on where the biggest multinationals are taxed would shift taxing rights on more than $100 billion of profits to countries where the profits are earned.
U.S. President Joe Biden stated that with a global minimum tax in place, multinational corporations will no longer be able to pit countries against one another in a bid to push tax rates down. They will no longer be able to avoid paying their fair share by hiding profits generated in the United States, or any other country, in lower-tax jurisdictions. The minimum corporate tax does not require countries to set their rates at the agreed floor. But it gives other countries the right to apply a top-up levy to the minimum on companies’ income coming from a lower rate country.
Seven advanced economies group has agreed in June on a minimum tax rate of at least 15%. This broader agreement will go to the Group of Twenty major economies for political endorsement at an upcoming meeting in Venice. By October the technical details are to be agreed. And so, the new rules can be implemented by 2023. The low tax EU members such as Ireland, Estonia and Hungary, Peru, Barbados, Saint Vincent and the Grenadines, Sri Lanka, Nigeria and Kenya are the nine countries that did not sign.
Irish Finance Minister Paschal Donohoe, said he was not in a position to join the consensus, but would still try to find an outcome that he could support. In the European Union, the deal will need an EU law to be passed, most likely during France’s presidency of the bloc in the first half of 2022. This will require unanimous backing from all EU members. French Finance Minister Bruno Le Maire said he would try to win over those holding out. He had asked them to do everything to join this historical agreement which is largely supported by most countries. He also added that all big digital corporations would be covered by the agreement.