- The EU members Ireland, Hungary and Estonia have not signed any agreement
- The OECD says a minimum tax of 15% could increase revenues by $ 15 billion
- Deal is expected to be completed by October and come into effect in 2023
PARIS, July 1 (Reuters) – Most countries negotiating a global overhaul of cross-border taxation for multinational corporations have backed plans for new corporate tax rules and a tax rate of at least 15%, they said after two on Thursday Days of Conversation.
The Paris-based organization for economic cooperation and development that hosted the talks said a minimum global corporate tax of at least 15% could generate around $ 150 billion in additional global tax revenue annually.
130 countries, representing more than 90% of world GDP, would have supported the agreement in the talks.
New rules on where the largest multinationals are taxed would shift taxation rights on profits over $ 100 billion to countries where the profits are made, she added.
“With a global minimum tax, multinational corporations will no longer be able to play countries off against each other to lower tax rates,” said US President Joe Biden in a statement.
“They will no longer be able to avoid their fair share by hiding profits made in the United States or any other country in countries with lower taxes,” he said.
A source close to the talks said it took tough negotiations to get Beijing on board. A US administration official said there were no China-specific carveouts or exceptions to the deal.
The minimum corporation tax does not require countries to set their rates at the agreed minimum rate, but rather gives other countries the right to levy a top-up tax on the minimum amount on the income of companies from a country with a lower rate.
The group of seven advanced economies agreed in June on a minimum tax rate of at least 15%. The broader agreement will be presented to the Group of Twenty Great Economies for political approval at a meeting in Venice next week.
Technical details are to be agreed by October so that the new rules can be implemented by 2023, according to a statement from countries that supported the agreement.
The nine countries that did not sign were the low-tax EU members Ireland, Estonia and Hungary, as well as Peru, Barbados, St. Vincent and the Grenadines, Sri Lanka, Nigeria and Kenya.
Holdouts are at risk of being isolated because not only have all the major economies signed up, but many well-known tax havens such as Bermuda, the Cayman Islands, and the British Virgin Islands have signed up.
Irish Treasury Secretary Paschal Donohoe, whose country has attracted many large US tech firms with its corporate tax rate of 12.5%, said he was “unable to join the consensus” but would still try to find an outcome that he could support.
In the European Union, the agreement requires the passage of EU law, most likely during the bloc’s French presidency in the first half of 2022, and that requires the unanimous support of all EU members.
French Finance Minister Bruno Le Maire hailed the deal as the most important international tax deal in a century and said he would try to win over those who prevail.
“I ask you to do everything you can to enter into this historic agreement, which is widely supported by most countries,” he said, adding that all major digital companies would be covered by the agreement.
The new minimum tax rate of at least 15% would apply to companies with sales above EUR 750 million ($ 889 million), excluding the shipping industry.
The new rules for taxing multinational corporations aim to achieve the right to a fairer distribution of their profits between countries, as the advent of digital commerce has allowed large tech companies to post profits in low-tax countries regardless of where they place money have earned.
Companies included in the scope would be multinational companies with global sales in excess of € 20 billion and pre-tax profit margins in excess of 10%, although the sales threshold could potentially drop to € 10 billion after seven years of review.
Extractive industries and regulated financial services are to be exempted from the rules on taxation of multinational corporations.
Implementation of the deal could prove rocky, not least in the US Congress, where Rep. Kevin Brady, top Republican on the House of Representatives’ tax-drafting committee on ways and means, called it “a dangerous economic surrender to US jobs abroad sends “undermines our economy and removes our US tax base.”
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Reporting by Leigh Thomas; Additional coverage by Conor Humphries in Dublin, Andrea Shalal and David Lawder in Washington, editing by Andrew Heavens, Pravin Char, Timothy Heritage and Richard Chang
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