Nine countries have adopted a global minimum corporate tax of 15% promoted by the Biden administration as a way to reduce international tax arbitration by US multinational companies and mitigate the impact of the domestic corporate tax hike proposed by President Joe Biden. Refused to sign the framework for international tax reform, including. ..
Officials from 130 of the 139 countries in the so-called OECD / G20 Comprehensive Framework for Tax Source Erosion and Transfer of Profit agreed to establish a new framework last week, while Ireland, Estonia, Hungary, Peru, Barbados, St. Vincent and The Grenadines, Sri Lanka, Sri Lanka, Nigeria and Kenya did not sign the agreement.
Ireland’s Finance Minister Paschal Donohoe has attracted many major U.S. tech companies with a corporate tax rate of 12.5%, but hasn’t joined the other signatories, but is still trying to find results he can regain. He said.
“I was not in a position to participate in the agreement, especially the consensus on the world’s minimum effective tax rate of at least 15 percent today,” said Donoho. “I have announced my reservation in Ireland, but I am still committed to the process and aim to find results that Ireland can still support.”
Hungarian Finance Minister Mihaly Varga, who has a corporate tax rate of 9%, dismissed the 15% tax rate as “too high.”
“The world’s lowest tax hinders economic growth and the planned 15% tax rate is too high and should not be imposed on actual economic activity,” Hungary said in a statement on Friday, but Hungary continues. He added that the negotiations would continue. ..
As a result of negotiations coordinated by the Organization for Economic Co-operation and Development (OECD) over the last decade, the two-pillar framework encourages large multinational corporations (MNEs) to do business and make profits while paying taxes. The purpose is to force you to. To end the race to the bottom of the international corporate tax rate.
The first pillar is to redistribute taxation rights on the interests of more than $ 100 billion of multinational corporations annually to markets that benefit from doing business from their own country, whether or not the enterprise actually exists. is.
The second pillar, with a global minimum corporate income tax rate of at least 15%, is estimated to generate additional global tax revenues of approximately $ 150 billion annually.
The Biden administration’s appeal for international cooperation on global corporate tax rates is a bid to at least partially counteract the potential disadvantages of the president’s proposal to raise the US corporate tax rate to 28%. As it undermines the competitiveness of US companies and slows wage growth.
The new rules that emerged from the agreement are tentatively expected to come into force in 2023, but to do so, the country needs to come up with the remaining details by October so that it can amend the tax law next year. Since then, some signatories, including India and Switzerland, have expressed reservations. This suggests that implementation in 2023 may be optimistic, given that many countries have taken years to ratify earlier, less extensive amendments to international tax treaties. doing.
Additional complexity is added to European Holdout, Estonia, as European Union law is a means to enforce the rules in the world’s largest trade bloc and requires unanimous support from all 27 EU member states. It occurs in the form of Hungary and Ireland.
Biden described the agreement as “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, Treasury Secretary Janet Yellen is expected to ask G20 counterparts this week for a global minimum tax rate that exceeds the 15% minimum tax rate agreed by 130 countries last week, but the tax rate will not be decided until the future stage of negotiations. Not expected, the Treasury Secretary said. on Tuesday.
The deal is widely expected to be approved by the G20 financial leaders who will meet on Friday and Saturday in Venice, Italy.
Reuters contributed to this report.