World leaders hail agreement on global corporate tax rate
Most countries have now signed up to a historic deal to ensure a minimum 15% corporate tax rate. Only four smaller economies are still holding back.
A new global corporate tax rate of at least 15% looks set to become a reality in 2023 after Hungary became the last European country to accept a proposal by the Organization for Economic Cooperation and Development (OECD).
After Ireland and Estonia joined the effort on Thursday, Hungary chose to sign the global tax after clinching a transitional period of 10 years with its own special rate.
The agreement has now been ratified by 136 countries, the OECD said Friday.
Only Kenya, Nigeria, Pakistan and Sri Lanka are still holding out from the 140 countries involved in the OECD talks.
What were the reactions?
“Establishing, for the first time in history, a strong global minimum tax will finally even the playing field for American workers and taxpayers, along with the rest of the world,” the US president said in a statement.
The US Treasury Secretary Janet Yellen said the agreement would yield “decades of increased prosperity,” dubbing it “a once-in-a-generation accomplishment for economic diplomacy.”
Global tech giant Google said that the new tax agreement is “an important step forward” and that it hopes “the momentum continues.”
But the Swiss Finance Ministry said small economies like its own would find it impossible to bring the tax in by 2023 while Poland voiced concern over investment.
Oxfam criticized the deal for its “complex web of exemptions.” The rate of 15% would do “little or nothing to end harmful tax competition,” the organization said in a statement.
What is the global tax reform plan?
The US had proposed the minimum corporate income tax of 15% to stop tax havens from competing to attract major companies.
The rate would affect fewer than 10,000 multinational companies, those with an annual turnover of more than €750 million ($890 million).
At a time of economic crisis caused by the COVID-19 pandemic, the OECD said it could boost government coffers by about $150 billion annually. More than $125 billion of corporate profits would also be moved to countries where these big companies generate their revenue.
The OECD said the deal would next go to G20 leaders for approval at the end of the month before being made law by 2023.