The world’s leading economies have struck a deal to revamp multinational corporate taxation that aims to dampen international tax rate competition.
130 nations and territories, including Luxembourg, have signed up to an OECD plan that requires multinational firms to pay a minimum tax rate of 15% worldwide, the OECD said on 1 July. The OECD, an international economic policy forum, estimated that this would raise $150bn in fresh tax revenue annually.
The agreement would also “re-allocate some taxing rights” from companies’ home countries to the markets where they do business, a move largely directed at digital companies. The OECD said “more than $100bn of profit are expected to be reallocated to market jurisdictions each year.” That plan “will apply initially only to the biggest companies with turnover exceeding €20bn,” explained the FT. The floor will fall to €10bn after 7 years.
The package will “ensure multinational companies pay their fair share of tax wherever they operate,” stated Mathias Cormann, OECD’s secretary general.
“Today’s agreement by 130 countries representing more than 90 percent of global GDP is a clear sign: the race to the bottom is one step closer to coming to an end,” CNBC quoted Janet Yellen, the US treasury secretary, as saying.
The regime is planned to get started in 2023.
Nine countries which participated in the talks did not sign the agreement: Barbados, Estonia, Hungary, Ireland, Kenya, Nigeria, Sri Lanka and St Vincent & the Grenadines. “Peru abstained because it currently does not have a government,” observed The Guardian.