The Organization for Economic Cooperation and Development said on Thursday that 130 countries have agreed to a comprehensive tax reform that will ensure multinational companies pay their fair share wherever they do business, but some European Union countries have refused 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, will be taxed at a rate of at least 15% once the deal is implemented.
The new tax system will add nearly $150 billion to government coffers around the world.
“The framework updates key elements of the secular international tax system, which are no longer fit for purpose in the globalized and digital economy of the 21st century,” the OECD said.
The formal agreement comes after last month’s ratification by the Group of Seven rich nations at a meeting in Britain. Negotiations now move to the G-20 meeting of advanced and emerging economies on July 9-10 in Venice, Italy.
US President Joe Biden said the latest deal “puts us within walking distance of a comprehensive global deal to stop the race to the bottom in corporate taxation.”
US Treasury Secretary Janet Willett called him a “historian.”
Germany, a proponent of tax reform, praised him for taking a “big step towards tax justice”, and France said it was “the most important tax deal in a century”.
“The fact that 130 countries around the world, including all of the G20 countries, is another step in our mission to reform global taxation,” said British Finance Minister Rishi Sunak, whose country holds the G7 presidency.
– ‘For the good of all’ –
But the organization said low-tax EU countries Ireland and Hungary had refused to sign the agreement reached within the framework of the Organization for Economic Co-operation and Development, highlighting persistent divisions over global taxation.
Both countries are part of a group of countries in the European Union, including Luxembourg and Poland, that have relied on low tax rates to attract multinationals and build their economies.
Ireland, home to tech giants like Facebook, Google and Apple, has a corporate tax rate of just 12.5%.
Irish Finance Minister Pascal Donohoe has warned that the new rules, if implemented, could cause Ireland to lose 20% of corporate revenue.
Nine of the 139 participants in the talks have not yet signed the agreement.
But China, whose stance is closely watched as it offers tax incentives to key sectors, backed the deal.
“It is in everyone’s interest to reach a final agreement among all members of the global framework, as expected by the end of the year,” said OECD Secretary-General Matthias Cormann.
“This package does not eliminate tax competition, as it should not, but it does place multilaterally agreed constraints,” Corman said, adding that it “also welcomes diverse interests at the negotiating table, even in small economies and jurisdictions underway development.”
– ‘Fairer’ global economy –
Finance officials have described the minimum tax as necessary to stem competition between countries over who can offer the lowest rate to multinational corporations.
For Biden, a global tax deal would help keep the United States competitive as he proposed raising domestic corporate taxes to pay for nearly $2 trillion in infrastructure and jobs program.
Biden praised “an important step in driving the global economy to be more equitable for middle-class workers and their families in the United States and around the world.”
He stressed that those countries that signed the agreement constitute more than 90% of the global economy.
The OECD statement says the package will “provide much-needed support to governments that need to raise the revenue they need” to reform their budgets and invest in measures to support post-Covid recovery.
He added that an implementation agreement is expected in October.
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© 2021 AFP