More than 130 countries have agreed to set a minimum corporate tax of 15%

On Friday, a group of 136 countries set a minimum global tax rate of 15% on large corporations.

Negotiations have been going on for four years, and the cost of a coronavirus pandemic has given them more impetus in recent months, but the agreement is agreed only when Ireland, Estonia and Hungary withdraw their opposition and sign up. it was done.

In addition, the agreed lower limit of 15% is well below the corporate tax rate of about 23.5% on average in developed countries.

The transaction is intended to thwart large corporations that make a profit in low tax countries such as Ireland, regardless of where their customers are.

Of the 140 countries involved, 136 have endorsed the agreement, with Kenya, Nigeria, Pakistan and Sri Lanka abstaining so far.

The Paris-based Organization for Economic Co-operation and Development (OECD), which has led the negotiations, said the agreement covers 90 percent of the world economy.

However, some countries have already expressed concern about conducting transactions because the ink is barely dry.

In a statement, the Swiss Treasury demanded that the interests of small countries be taken into account, stating that a 2023 implementation date would not be possible, but Poland, concerned about the impact on foreign investors, said He said he would continue to work on the deal.

At the heart of the agreement is a minimum corporate tax rate of 15%, which allows the government to tax a larger share of the interests of foreign multinationals.

The OECD said that at minimum tax rates, countries raise about $ 150 billion in new revenues annually, while taxation rights on profits in excess of $ 125 billion are transferred to countries where large multinational companies earn income. ..

Ireland, Estonia, Hungary and all low-tax countries have withdrawn this week as they have compromised deductions from the minimum tax rates of multinational corporations that are actually doing physical business abroad.

Kenya, Nigeria and Sri Lanka did not support the previous version of the deal, but Pakistan’s abstention was a surprise, one official said in a statement. India was also worried until the last minute, but they added that it eventually boosted the deal.

Companies that have real assets and salaries in a country can guarantee that some of their income will circumvent the new minimum tax rate. The level of exemption will gradually decrease over a 10-year period.

The OECD will then go to a group of 20 economic powers, formally approve it at the Finance Ministers’ meeting in Washington on October 13, and then proceed to the G20 summit in Rome at the end of the month. Stated. Final approval.

Some questions remain about the US’s position, which is partly dependent on parliamentary domestic tax reform negotiations.

Countries supporting the deal are to bring it into their law books next year so that it can come into force from 2023, which many officials say is very strict.

France’s Finance Minister Bruno Le Maire said Paris would use the Presidency of the European Union in the first half of 2022 to convert the agreement into law across blocks of 27 countries.