A global push to enact a minimum international tax on big corporations moved closer to reality on Friday as one of the last holdouts, Hungary, agreed to join a reform that now counts 136 countries.
The Organisation for Economic Co-operation and Development (OECD)-brokered deal, which sets a global tax of 15 percent, is aimed at stopping international corporations from slashing tax bills by registering in nations with low rates.
“Today’s agreement will make our international tax arrangements fairer and work better,” OECD Secretary-General Mathias Cormann said. “This is a major victory for effective and balanced multilateralism.”
Hungary’s announcement came a day after another key opponent, Ireland — whose low tax rate has attracted the likes of Apple Inc and Alphabet Inc’s Google — relented and agreed to join the global effort.
With Hungary, 136 countries representing 90 percent of global GDP have now signed up, the Paris-based OECD said.
Estonia also joined the reform on Thursday.
The OECD said Kenya, Nigeria, Sri Lanka and Pakistan are the last holdouts among 140 countries that have negotiated the tax.
Pakistan had been on a previous list of signatories.
The organization said countries are aiming to sign a multilateral convention next year, with an eye on implementing the reform in 2023.
The years-long talks received a boost earlier this year when the administration of US President Joe Biden backed a global minimum tax rate of at least 15 percent.
The COVID-19 pandemic, added urgency to the reforms as countries need new sources of revenue to pay for huge stimulus programs that were deployed during last year’s global recession.
“Today’s agreement represents a once-in-a-generation accomplishment for economic diplomacy,” US Secretary of the Treasury Janet Yellen said in a statement.
“As of this morning, virtually the entire global economy has decided to end the race to the bottom on corporate taxation,” Yellen said.
European Commission President Ursula von der Leyen called it a “historic moment,” saying “all companies have to pay their fair share.”
The Brussels-based Computer and Communications Industry Association welcomed the deal.
It was a step “to ensure that the international tax rules reflect today’s global economy,” association vice president Christian Borggreen said in a statement. “This is an important step towards more fairness and certainty in the global tax system.”
However, the charity Oxfam was scathing.
“Today’s tax deal was meant to end tax havens for good. Instead it was written by them,” Oxfam tax policy expert Susana Ruiz said. “This deal is a shameful and dangerous capitulation to the low-tax model of nations like Ireland.”
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