A total of 130 countries have agreed to a global tax reform ensuring standardized rules for multinationals wherever they operate, the Organisation for Economic Co-operation and Development (OECD) said on Thursday, although some EU states did not sign up.
The OECD said in a statement that global companies, including US behemoths Google, Amazon.com Inc, Facebook Inc and Apple Inc would be taxed at least 15 percent once the deal is implemented.
The new tax regime would add about US$150 billion to government coffers globally once it comes into force, which the OECD said it hoped would be in 2023.
“The framework updates key elements of the century-old international tax system, which is no longer fit for purpose in a globalized and digitalized 21st century economy,” the OECD said.
The formal agreement follows an endorsement last month by the G7, and negotiations now move to a meeting of the G20 in Venice, Italy, on Friday and Saturday next week.
US President Joe Biden said that the latest deal “puts us in striking distance of full global agreement to halt the race to the bottom for corporate taxes.”
Germany, another backer of the tax reform, hailed it as a “colossal step towards tax justice,” while France said it was “the most important tax agreement in a century.”
British Chancellor of the Exchequer Rishi Sunak, whose country holds the G7 presidency, said “the fact that 130 countries across the world, including all of the G20, are now on board, marks a further step in our mission to reform global tax.”
However, Ireland and Hungary declined to sign up to the agreement reached in the OECD framework, the organization said.
Both countries are part of a group of EU nations also including Luxembourg and Poland that have relied on low tax rates to attract multinationals and build their economies.
Ireland, the EU home to tech giants Facebook, Google and Apple, has a corporate tax rate of 12.5 percent.
Irish Minister of Finance Paschal Donohoe has warned that the new rules could see Ireland lose 20 percent of its corporate revenue.
On Thursday, Donohoe said that Ireland still “broadly supports” the deal, but not the 15 percent tax floor.
“There is much to finalize before a comprehensive agreement is reached,” he said, adding that Ireland would “constructively engage” in further discussions.
Also expressing concerns is Switzerland, which said that it would support the measures despite “major reservations” and that it hoped the interests of “small, innovative countries” be taken into account.
An agreement for the implementation of the plan is planned for October.
Nine of the 139 participants in the talks have so far not signed on to the agreement.
China, whose position was being closely watched, as it offers tax incentives to key sectors, endorsed the agreement.
“It is in everyone’s interest that we reach a final agreement among all Inclusive Framework Members as scheduled later this year,” OECD Secretary-General Mathias Cormann said.
“This package does not eliminate tax competition, as it should not, but it does set multilaterally agreed limitations on it,” Cormann said, adding that “it also accommodates the various interests across the negotiating table, including those of small economies and developing jurisdictions.”
Ministers of finance have characterized a minimum tax as necessary to stem competition between countries over who can offer multinationals the lowest rate.
For Biden, a global tax agreement would help maintain US competitiveness, as he has proposed hiking domestic corporate taxes to pay for an infrastructure and jobs program with a price tag of about US$2 trillion.
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