On June 1, officials from 130 countries agreed to establish the Organization for Economic Co-operation and Development (OECD), a new framework for international tax reform. Announcement..
The two-pillar package means that multinationals, including Big Tech, will be forced to pay a minimum of 15% tax in each country in which they do business, regardless of whether the company actually exists. ..
This eliminates the incentive to use tax havens and legal systems to shift profits to low-interest countries that do little or no business.
The OECD said more than $ 100 billion in profits are expected to be redistributed to market jurisdictions each year, with approximately $ 150 billion expected to be raised from the world’s lowest tax rates.
“Additional benefits will also come from stabilizing the international tax system and increasing tax certainty for taxpayers and tax authorities,” the organization added.
The organization said 130 countries, including the United States, United Kingdom, China and France, which account for more than 90% of global GDP, would support the agreement at the talks and the Treasury Minister would approve the agreement on July 9. ..
Source Told Reuters It took strict negotiations to get Beijing on board. US officials said the deal had no China-specific carve-outs or exceptions.
The conclusions of the negotiations, including the remaining elements of the framework and the implementation plan, will be finalized by October 2021 and an effective implementation plan will be planned in 2023.
However, despite strong opposition from low-tax countries such as Ireland, Estonia, Hungary, Peru, Barbados, St. Vincent and the Grenadines, Sri Lanka, Nigeria and Kenya who did not sign the agreement, the agreement is in place.
Ireland’s Treasury Minister Paschal Donohoe, who has fascinated many major U.S. tech companies with a corporate tax rate of 12.5%, said he was “not in a position to participate in the consensus” but still tried to find a result he could support. I tried.
“After years of intense work and negotiations, this historic package ensures that large multinationals pay fair tax burdens everywhere,” said OECD Secretary-General Mathias Cormann. It states as follows. statement.. “This package should not eliminate tax competition, but it does set multilaterally agreed limits.
“It also addresses a variety of interests across the negotiating table, including the interests of small countries and developing jurisdictions. As scheduled for later this year, a final agreement will be reached among all inclusive framework members. Reaching is in the interests of everyone, “Corman added.
President Joe Biden also called the agreement “an important step towards advancing the global economy and becoming more equitable for workers and middle-class families in the United States and around the world.”
“Once a global minimum tax is set, multinationals will no longer be able to compete with each other to reduce tax rates and protect profits at the expense of public income. They are no longer in the United States. By hiding profits generated in and other countries in low tax jurisdictions, we cannot avoid paying a fair share, “says Biden. statement..
“This will level the playing field and increase America’s competitiveness, which is to make the generational investment we need to keep America’s competitiveness sharp in today’s world economy. It will allow us to contribute the additional income we raise, “he added.
Meanwhile, US Treasury Secretary Janet Yellen said the deal was “a historic day of economic diplomacy.”
“Today’s agreement by 130 countries, which account for more than 90% of world GDP, is a clear sign. Race to the bottom is a step towards the end,” said Yellen. statement..
The announcement precedes further discussions on tax reform to be held between the Finance Ministers at the G20 meeting in Venice in July, prior to final approval by the G20 Summit in October.
The Associated Press contributed to this report.