Plans to force multinational companies to pay fairer taxes by setting an overall minimum have taken a step forward with the support of 130 countries and jurisdictions, the Organization for Economic Co-operation and Development said Thursday.
The US-backed agreement sets a corporate tax rate of at least 15% in an attempt to discourage businesses from moving from country to country to exploit lower rates.
G7 leaders gave their approval at the Cornwall summit last month.
Collectively, the countries that have accepted the plan represent more than 90 percent of global GDP.
“Today is a historic day for economic diplomacy,” Treasury Secretary Janet Yellen said in a statement.
“For decades the United States has participated in self-defeating international tax competition, lowering our corporate tax rates only to see other countries cut theirs in response. The result was a race to the bottom on a global scale: who could lower their corporate interest rate further and faster? “
She added that the agreement showed that “the race to the bottom is one more step towards its end. In its place, America will enter a competition that we can win; we judged on the competence of our workers and the solidity of our infrastructures ”.
“We now have a chance to build a global and national tax system that allows American workers and businesses to compete and win in the global economy. President Biden spoke of a “foreign policy for the middle class”, and today’s deal is what that looks like in practice, “she added.
Ireland, Barbados, Hungary and Estonia are among the OECD members that have yet to accept the deal.
The OECD said the new plan “updates key elements of the century-old international tax system” which is no longer suited to today’s global and digital economy.
The framework was decided in negotiations “for much of the past decade” and would ensure that global companies “pay taxes where they operate and make profits”. The OECD said this would add “much needed certainty and stability to the international tax system.”
The first “pillar” of the plan “will ensure a more equitable distribution of profits and taxing rights among countries” concerning large international companies, including digital ones.
This part of the plan also aims to “reallocate certain taxing rights” on multinational companies “from their country of origin to the markets where they do business and make profits, whether or not the companies are physically present there.” .
The second pillar “aims to put a floor on competition in terms of corporate tax, by introducing a minimum overall corporate tax rate”.
The OECD said countries can use the minimum rate to “protect their tax base”. The organization said the new framework will help countries “fix their budgets and balance sheets” as they attempt to recover from the Covid-19 pandemic.
Tax rights on more than $ 100 billion in profits will be reallocated each year to “market jurisdictions”. The world’s minimum corporate income tax rate of at least 15% is estimated to generate around $ 150 billion in additional global tax revenue each year.
“After years of hard work and negotiations, this historic package will ensure that large multinational companies pay their fair share of taxes everywhere,” said OECD Secretary General Mathias Cormann.
“This package does not eliminate tax competition, as it should not, but it sets multilaterally agreed limits. It also takes into account the various interests at the negotiating table, including those of small economies and developing jurisdictions. It is in everyone’s interest that we reach a final agreement among all members of the Inclusive Framework as expected later this year, ”he added.
The “deadline to finalize the remaining technical work on the two-pillar approach” is set for October this year and the implementation of the new system is scheduled for 2023.
Each country that has accepted the new framework will have to implement its own policies in its home country, which could become a problem in the United States, as some Republicans have indicated that they are not happy with this new development. .
The prominent member of the House Ways and Means Committee, Republican Representative for Texas, Kevin Brady, said in a statement: “In the negotiations with the OECD, the Biden administration has already ceded important ground to the states. -United.”
He said the new framework would give companies headquartered outside the United States a head start.
“This is a dangerous economic surrender that sends American jobs overseas, undermines our economy and removes our US tax base,” he added.
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Source: www.independent.co.uk
This notice was published: 2021-07-01 23:27:20
