Landmark global corporate tax deal finally wins agreement

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PARIS: A landmark global agreement was agreed to ensure large companies pay a minimum tax rate of 15% and make it difficult to avoid tax after Ireland, Estonia and Hungary signed an agreement that the US president. Joe biden He said leveled the playing field.
The agreement aims to end a four-decade “race to the bottom” by governments that have tried to attract investment and jobs by taxing multinational companies only lightly and allowing them to compare low tax prices.
Negotiations have been going on for four years, moving forward online during the pandemic, with support for an agreement from US President Joe Biden, and the costs of the Covid-19 crisis have given it a additional momentum in recent months.
“Establishing, for the first time in history, a strong global minimum tax will finally level the playing field for American workers and taxpayers, along with the rest of the world,” President Biden said in a statement.
The deal aims to prevent big companies from making a profit in low-tax countries like Ireland, regardless of where their customers are, a problem that has become increasingly urgent with the rise of “big-tech” giants that can do business easily across borders.
Of the 140 countries involved, 136 supported the deal, with Kenya, Nigeria, Pakistan and Sri Lanka abstaining for now.
The Paris-based Organization for Economic Cooperation and Development (OECD), which has been leading the talks, said the deal would cover 90% of the global economy.
“Today we have taken another important step towards greater tax justice,” said the German finance minister. Olaf Scholz it said in an emailed statement to Reuters.
“We now have a clear path towards a fairer tax system, where the big global players pay their fair share wherever they do business,” his British counterpart. Rishi Sunak said.
With the ink barely dry on the agreement, some countries were already expressing concern about its implementation.
The Swiss Finance Ministry demanded in a statement that the interests of small economies be taken into account and said the 2023 implementation date was impossible.
Poland, which is concerned about the impact on foreign investors, said it will continue to work on the deal.
‘Decades of greater prosperity’
A central element of the agreement is a minimum corporate tax rate of 15% and allowing governments to tax a larger share of the profits of foreign multinationals.
US Treasury Secretary Yellen hailed it as a victory for American families and for international business.
“We have turned tireless negotiations into decades of greater prosperity, both for the United States and for the world. Today’s agreement represents a once-in-a-generation achievement for economic diplomacy,” Yellen said in a statement.
The OECD said the minimum rate would see countries raise about $ 150 billion in new revenue annually, while tax duties on more than $ 125 billion of profits would shift to countries where large multinationals earn their income.
Ireland, Estonia and Hungary, all low-tax countries, dropped their objections this week when a compromise emerged on a minimum rate deduction for multinationals with actual physical business activities abroad.
‘Without teeth’
But some developing countries seeking a higher minimum tax rate say their interests have been sidelined to accommodate the interests of richer countries like Ireland, which had refused to sign an agreement with a minimum tax rate higher than 15. %.
Argentine Minister of Economy Martin Guzman He said Thursday that the proposals on the table force developing countries to choose between “something bad and something worse.”
While Kenya, Nigeria and Sri Lanka did not endorse an earlier version of the deal, Pakistan’s abstention came as a surprise, an official briefed on the talks said. India also had qualms until the last minute, but ultimately backed the deal, they added.
There was also discontent among some campaign groups, such as Oxfam, who said the deal would not end tax havens.
“The tax devil is in the details, including a complex web of exemptions,” said Oxfam’s tax policy leader. Susana ruiz said.
“At the last minute, a colossal 10-year grace period was imposed on the global corporate tax of 15 percent, and the additional loopholes leave it virtually toothless.” Ruiz added in a statement.
The OECD said the deal would then be passed on to the economic powers of the Group of 20 for formal endorsement at a meeting of finance ministers in Washington on October 13 and then at a summit of G20 leaders later this month in Rome for their final approval.
Some doubts remain about the position of the United States, which depends in part on the internal tax reform negotiations in Congress.
Countries backing the deal are supposed to put it on their law books next year so it can take effect starting in 2023, which many officials have said is extremely strict.
French Finance Minister Bruno Le Maire said Paris would use its presidency of the European Union during the first half of 2022 to translate the agreement into law in the 27-nation bloc.





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