An effort to make the most radical changes to the global tax system in a century gained significant momentum on Thursday when 130 countries agreed to a plan in which multinational corporations would pay a fair share of tax wherever they operate.
The deal comes closer to a goal that had proved elusive for the global community for decades as countries tried to prevent companies from buying the jurisdiction with the lowest rates – what the Treasury Secretary Janet Yellen has called a 30-year “race to the bottom” on corporate taxes.
The outcome of the negotiations, overseen by the Paris-based Organization for Economic Co-operation and Development and relaunched this year by President Joe Biden, is also remarkable as it includes China, Russia and India among the signatories – large economies that were wary of a tax review.
The framework includes a minimum corporate tax rate of 15%, which had been proposed by the United States, and rules that would require tech giants like Amazon and Facebook and other large global companies to pay taxes. taxes in countries where their goods or services are sold, even if they are not physically present there.
Closing some of the world’s most notorious tax loopholes will generate an estimated $ 150 billion in additional tax revenue each year, said the OECD, reshaping global trade and strengthening the finances that have deteriorated in many countries after more than ‘one year of fighting the pandemic.
A final deal could also end a brewing global trade war over the taxation of companies like Amazon, Google, Facebook and others that generate online revenue around the world.
Critical details still need to be worked out, including how to execute the plan, which is expected to be finalized in October, the OECD said. And after that, the new digital taxes and global minimum taxes on businesses are still expected to be approved by Congress and national legislatures.
Small countries that have long benefited from being tax havens are waiting for better conditions.
Ireland in particular resisted a 15% minimum tax and refused to sign Thursday’s deal.
The tax havens of the Breezy Islands of the Caribbean have also refused to sign, including Barbados, Saint Vincent and the Grenadines. Hungary and Estonia, anxious to preserve their ultra-low tax regimes, have joined the dissidents, as have Kenya, Nigeria, Peru and Sri Lanka.