130 Countries Support A Global Tax Reform

 

The OECD said on Thursday that mediators had agreed to a recommended minimum corporation tax rate of at least 15%.

“Today is a historic day for economic diplomacy,” stated US Treasury Secretary Janet Yellen.

The taxation of large technology businesses has been a subject of contention between the United States and others.

The Organization for Economic Cooperation and Development (OECD), which spearheaded the negotiations, estimated that the proposals might produce $150 billion (£109 billion) in tax revenue per year.

However, the Paris-based organization revealed that Ireland and Hungary, both of which have low corporation taxes, had not signed up to the global minimum agreement.

The accord was supported by all G20 countries, including the United States, the United Kingdom, China, and France.

Participating nations are now expected to strive to pass necessary laws to bring in the bare minimum, while specifics such as possible exclusions for certain businesses are still being negotiated.

“A detailed implementation plan together with remaining issues will be finalized by October 2021,” said a statement signed by 130 out of 139 countries and jurisdictions involved in the talks.

Nations have also agreed to new regulations governing where the largest multinational corporations are taxed. They would see taxes rights on more than $100 billion in earnings transfer to nations where revenues are created, rather than where a company’s headquarters are located.

The deal, according to US Treasury Secretary Janet Yellen, signals the end of a “race to the bottom” on tax rates.

“For decades, the US has participated in self-defeating international tax competition, lowering our corporate tax rates only to watch other nations lower theirs in response.

“The result was a global race to the bottom: Who could lower their corporate rate further and faster?”

She said that “no nation” had gained in the race.

The Biden administration has been pressing for a settlement on the overseas front while also attempting to raise taxes on the home front. It has, for example, advocated for an increase in the corporation tax rate in the United States from 21% to 28%.

His deal has been in the works for some years. The discussions had stalled, owing in large part to the United States’ dissatisfaction with either of the main offers.

But that all changed in January when the new government took office in Washington. President Joe Biden and Treasury Secretary Janet Yellen both sought a settlement and made specific suggestions. They intend to levy additional taxes in order to rebuild the public finances following the epidemic and to pay their expenditure commitments.

A few nations have resisted the revisions, notably three in the EU: Ireland, Hungary, and Estonia, all of which have corporation taxes that are lower than the proposed minimum.

Staying out won’t assist them if the agreement goes as anticipated. It has a “top-up” clause, which means that if a subsidiary pays less than the minimum, the parent firm will get an extra bill.