The Organization for Economic Co-operation and Development (OECD) announced on Thursday that 130 nations have approved a plan to reform the taxation of multinational corporations.
The plan has two pillars. The first pillar would shift some tax rights on multinational corporations (MNEs) from their home countries to the regions where they operate and make profits, regardless of whether the MNEs are physically present in those regions. The second pillar aims to introduce a global minimum corporate tax rate of 15 percent. The first pillar is expected to reallocate tax rights over approximately US $ 100 billion in MNE profits, while the second pillar is expected to generate US $ 150 billion in annual global tax revenue.
The OECD plan is based on an agreement between the G7 countries last month to set a global tax rate for MNEs. The OECD plan provides for a deadline for the completion of the technical parts of the two-pillar plan in October 2021, with implementation of the plan by 2023. OECD Secretary General Mathias Cormann said the two-pillar plan will “ensure that large multinational corporations” pay their fair share of taxes everywhere. “
However, several smaller nations, especially Ireland, have not signed the agreement. Ireland currently has a low corporate tax rate of 12.5 percent, and its finance minister, Paschal Donohoe, issued a statement largely in support of the two-pillar plan but with reservations about the minimum tax of 15 percent. Still, Minister Donohoe said Ireland “stays”.[s] committed to the process. “Other nations that have rejected the agreement include Barbados, St. Vincent, the Grenadines, Hungary, Estonia, Kenya, Nigeria, Peru and Sri Lanka.