A total of 130 countries signed this Thursday (1) a historic tax reform agreement for multinationals, which includes a minimum profit tax of at least 15%, announced the Organization for Economic Cooperation and Development (OECD) .
“After years of hard work and intense negotiations, this historic package of measures will ensure that large multinational companies pay their fair share of taxes around the world,” OECD Secretary General Mathias Cormann said in a statement.
A small group of countries, including Ireland and Hungary, very reluctant about the proposal, in particular about the minimum rate of 15%, did not sign the declaration concluded on Thursday, according to the list provided by the organization.
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However, the Irish government, through its finance minister, Paschal Donohoe, said it “supports globally” the agreement and said its “objective is to find a way out that Ireland can continue to support.”
China, whose positioning was long overdue, and countries generally considered tax havens, joined the pact. “Despite great reticence”, Switzerland adhered with conditions, including that “the interests of small innovative countries are taken into account”. Together, all signatory countries represent 90% of world GDP.
“Multinationals will no longer be able to pit one country against another in an effort to reduce taxes and protect their profits at the expense of public revenue,” US President Joe Biden reacted in a statement.
These companies “can no longer avoid paying their fair share by hiding profits generated in the United States, or any other country, in lower tax jurisdictions,” he added.
US Treasury Secretary Janet Yellen celebrated a “historic day for economic diplomacy.”
For French Economy Minister Bruno Le Maire, this is “the most important international tax agreement of the last century”, while his German counterpart, Olaf Scholz, praised “a giant step towards greater tax justice”.
While the deal puts pressure on the more aggressive tax haven model, it should mainly benefit rich countries, according to the NGO Oxfam.
“Rich countries are forcing developing countries to choose between a disadvantageous deal or no deal,” the organization said in a statement, denouncing a “new form of economic colonialism.”
The joint communiqué, which builds on the agreement reached at the G7 in early June, aims to end fiscal competition at a time when states are spending too much to deal with the pandemic.
It also provides for a “fairer” distribution of the tax on corporate profits of multinationals that are present in many countries. This part targets in particular the digital giants.
However, extractive industries such as mining and regulated financial services will be excluded from this measure, but not from the minimum tax, the text says.
The CCIA, a commercial federation of digital industries that includes Amazon and Facebook, has indicated it is “eager to go into the details of the implementation plan and urges countries to remove existing taxes on digital services and abandon” other similar projects under study, according to its president Matt Schruers.
The proposed plan will be “of great help to states” who spent a lot during the pandemic and need to fund recovery, the OECD said in its statement.
“This package of measures does not end tax competition, nor does it intend to do so, but rather seeks to limit it in accordance with multilaterally agreed norms,” said Corman.
– Application in 2023 –
The participants in the negotiations have until October to “finalize the technical work” and prepare “a plan for its effective implementation in 2023”. Until then, countries that have not joined the agreement can do so.
The G20 Economy Ministers, who will meet next week in Venice, are expected to approve the technical and political progress achieved on Thursday.
A first agreement at the G7 in early June in London gave new impetus to these negotiations, stagnant during Donald Trump’s presidency, and reactivated with the arrival of Joe Biden in the White House.
The health crisis, which made states spend en masse to fight the pandemic and support their economies, also reinforced the political will to reach an agreement to raise tax revenue.
According to the OECD, with a rate of at least 15%, the global minimum tax would generate about 150 billion dollars in additional tax revenue per year worldwide.
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