Paris: Ireland, Estonia and Hungary have struck a milestone global deal to make it harder for large companies to pay a minimum tax rate of 15% and avoid taxation after signing a deal on which the US President has signed. Joe Biden Said the playing field leveled.
The deal is intended to end a four-decade “downward race” by governments that have sought to attract investment and jobs by taxing multinationals only lightly and allowing them to shop for lower tax rates. has demanded.
As talks have been going on for four years, moving online during the pandemic, support for a deal from US President Joe Biden and the costs of the Covid-19 crisis has given it additional momentum in recent months.
“For the first time in history, the establishment of a robust global minimum tax will ultimately lead to a level playing field for American workers and taxpayers, as well as for the rest of the world,” President Biden said in a statement.
The deal is intended to prevent large firms from booking profits in low-tax countries such as Ireland, regardless of where their clients are, an issue that has become more pressing with the rise of “big tech” giants that can easily Can trade across borders.
Of the 140 countries involved, 136 supported the agreement, with Kenya, Nigeria, Pakistan and Sri Lanka remaining separate.
The Paris-based Organization for Economic Co-operation and Development (OECD), which is leading the talks, said the deal would cover 90% of the global economy.
“Today we have taken another important step towards greater tax justice,” German Finance Minister Olaf Scholzo said in a statement emailed to Reuters.
“We now have a clear path to a fair tax system, where the big global players pay their fair share wherever they do business,” his British counterpart said. Rishi Sunak said.
With the ink barely drying on the deal, some countries were already expressing concerns about its implementation.
The Swiss finance ministry in a statement demanded that the interests of smaller economies be taken into account and said a 2023 implementation date was impossible.
Poland, which has concerns about the impact on foreign investors, said it would continue to work on the deal.
‘Decades of increased prosperity’
At the heart of the agreement is a minimum corporate tax rate of 15% and allowing governments to tax a large proportion of the profits of foreign multinationals.
U.S. Treasury Secretary Yellen saw it as a victory for American households as well as international trade.
“We have turned decades of relentless negotiations into decades of increased prosperity for both America and the world. Today’s agreement represents a once-in-a-generation achievement for economic diplomacy,” Yellen said in a statement.
The OECD said the minimum rate would give countries about $150 billion in new revenue annually, while tax rights on gains of more than $125 billion would be transferred to countries where large multinationals earn their income.
Ireland, Estonia and Hungary, all low-tax countries, dropped their objections this week as agreements reached a minimum rate cut for multinationals with actual physical business activities abroad.
‘No teeth’
But some developing countries called for a higher minimum tax rate, saying that their interests were sidelined to accommodate the interests of wealthy countries such as Ireland, who signed an agreement with a minimum tax rate higher than 15%. had refused.
Argentine Economy Minister Martin Guzman On Thursday it said the proposals on the table forced developing countries to choose between “something bad and something bad”.
An official briefed on the talks said Kenya, Nigeria and Sri Lanka did not support the previous version of the agreement, but were surprised by Pakistan’s absence. He said India also had trouble till the last minute, but ultimately backed the deal.
There was also discontent among some campaign groups, such as Oxfam, who said the deal would not eliminate tax havens.
“The Tax Devil is in the Details, Including a Complicated Web of Exemptions,” Oxfam Tax Policy Lead Susana Ruizo said.
“A hefty 10-year grace period of 15 percent was imposed on global corporate tax at the last minute, and the additional loophole leaves it practically no dent,” rouge Added in a statement.
The OECD said the deal would go to the Group of 20 economic powers to be formally endorsed at a meeting of finance ministers in Washington on 13 October and then to a month-end G20 leaders’ summit in Rome for final approval. .
There are some questions about the position in the US, which depends in part on domestic tax reform talks in Congress.
Countries that have withdrawn the deal should put it on their law books next year so that it can take effect from 2023, which many officials have said is too stringent.
French Finance Minister Bruno Le Maire said Paris would use its EU presidency to translate the agreement into law in the 27-nation bloc during the first half of 2022.
The deal is intended to end a four-decade “downward race” by governments that have sought to attract investment and jobs by taxing multinationals only lightly and allowing them to shop for lower tax rates. has demanded.
As talks have been going on for four years, moving online during the pandemic, support for a deal from US President Joe Biden and the costs of the Covid-19 crisis has given it additional momentum in recent months.
“For the first time in history, the establishment of a robust global minimum tax will ultimately lead to a level playing field for American workers and taxpayers, as well as for the rest of the world,” President Biden said in a statement.
The deal is intended to prevent large firms from booking profits in low-tax countries such as Ireland, regardless of where their clients are, an issue that has become more pressing with the rise of “big tech” giants that can easily Can trade across borders.
Of the 140 countries involved, 136 supported the agreement, with Kenya, Nigeria, Pakistan and Sri Lanka remaining separate.
The Paris-based Organization for Economic Co-operation and Development (OECD), which is leading the talks, said the deal would cover 90% of the global economy.
“Today we have taken another important step towards greater tax justice,” German Finance Minister Olaf Scholzo said in a statement emailed to Reuters.
“We now have a clear path to a fair tax system, where the big global players pay their fair share wherever they do business,” his British counterpart said. Rishi Sunak said.
With the ink barely drying on the deal, some countries were already expressing concerns about its implementation.
The Swiss finance ministry in a statement demanded that the interests of smaller economies be taken into account and said a 2023 implementation date was impossible.
Poland, which has concerns about the impact on foreign investors, said it would continue to work on the deal.
‘Decades of increased prosperity’
At the heart of the agreement is a minimum corporate tax rate of 15% and allowing governments to tax a large proportion of the profits of foreign multinationals.
U.S. Treasury Secretary Yellen saw it as a victory for American households as well as international trade.
“We have turned decades of relentless negotiations into decades of increased prosperity for both America and the world. Today’s agreement represents a once-in-a-generation achievement for economic diplomacy,” Yellen said in a statement.
The OECD said the minimum rate would give countries about $150 billion in new revenue annually, while tax rights on gains of more than $125 billion would be transferred to countries where large multinationals earn their income.
Ireland, Estonia and Hungary, all low-tax countries, dropped their objections this week as agreements reached a minimum rate cut for multinationals with actual physical business activities abroad.
‘No teeth’
But some developing countries called for a higher minimum tax rate, saying that their interests were sidelined to accommodate the interests of wealthy countries such as Ireland, who signed an agreement with a minimum tax rate higher than 15%. had refused.
Argentine Economy Minister Martin Guzman On Thursday it said the proposals on the table forced developing countries to choose between “something bad and something bad”.
An official briefed on the talks said Kenya, Nigeria and Sri Lanka did not support the previous version of the agreement, but were surprised by Pakistan’s absence. He said India also had trouble till the last minute, but ultimately backed the deal.
There was also discontent among some campaign groups, such as Oxfam, who said the deal would not eliminate tax havens.
“The Tax Devil is in the Details, Including a Complicated Web of Exemptions,” Oxfam Tax Policy Lead Susana Ruizo said.
“A hefty 10-year grace period of 15 percent was imposed on global corporate tax at the last minute, and the additional loophole leaves it practically no dent,” rouge Added in a statement.
The OECD said the deal would go to the Group of 20 economic powers to be formally endorsed at a meeting of finance ministers in Washington on 13 October and then to a month-end G20 leaders’ summit in Rome for final approval. .
There are some questions about the position in the US, which depends in part on domestic tax reform talks in Congress.
Countries that have withdrawn the deal should put it on their law books next year so that it can take effect from 2023, which many officials have said is too stringent.
French Finance Minister Bruno Le Maire said Paris would use its EU presidency to translate the agreement into law in the 27-nation bloc during the first half of 2022.
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