Taxation Heads of state praise agreement on global minimum corporate tax level, criticize organizations: “Toothless”

136 countries have now agreed on a global minimum corporate tax rate of 15% for large companies.

10.10. 15:01 | Updated 10.10. 16:21

Over the years Negotiations resumed on Friday when the OECD said 136 countries had joined the agreement on a 15% minimum corporate tax rate for large companies.

It has been hoped that the agreement will curb the tax planning of large companies and set limits on competition between countries, where attempts have been made to attract companies through light taxation.

Read more: Hungary, Estonia and Ireland join international corporate tax minimum – desire to curb tax planning for large companies

Agreement receives praise from, among others, the President of the United States From Joe Biden and several European leaders.

In a statement, Biden states that “a strong global minimum tax will finally level the playing field for U.S. workers and taxpayers alongside the rest of the world”.

French Minister of Finance Bruno Le Mairen considers that the agreement, in turn, paves the way for a “real tax revolution”.

British Treasury Secretary Rishi Sunak describes the agreement as “a clear path towards a fairer tax system in which global players pay their fair share where they operate”.

Reviews the agreement, in turn, comes from NGOs and some developing countries who believe the agreement was made on rich country terms.

For example, the international development organization Oxfam criticizes the agreement as “toothless”, among other things because many of the exceptions to the agreement could allow large companies like Amazon to do little. It also criticizes the minimum level of 15% of the tax as too low.

Currently, the average corporate tax level in industrialized countries is 23.5 percent, well above that.

According to Oxfam, developing countries are more dependent on corporate tax revenues. In 2018, they collected 19% of their income from corporate taxes, compared to 10% in OECD countries, it write in his statement. There are fears that developing countries will lose important revenues if tax levels fall.

NGO Tax Justice Network the criticisms are parallel. It states that the minimum tax rate of 15% is so low that incentives to transfer profits remain substantial.

Minimum tax rate underpinned by a mechanism prepared by the OECD. The G7 finance ministers said in June they had agreed on a global corporate tax minimum, and the proposal has since been approved by the G20.

Negotiations on a tax treaty have been going on for four years, and now the matter has progressed again with the accession of Ireland, Estonia and Hungary.

The agreement also outlines a mechanism by which the largest companies could be taxed according to the country in which they have their turnover, and not just according to where they are registered.

According to OECD calculations as a result of the agreement, states would collect $ 150 billion in additional tax revenue annually. The right to tax 125 billion in revenue would be transferred to the countries where the largest companies make their profits.

Lightweight the Irish Minister for Finance, known for his corporate taxation Paschal Donohoe thanked the agreement fresh.

“This agreement is a milestone that addresses the challenges of digitalisation in international taxation and provides the certainty and stability that large companies and governments provide. [– –] I am convinced that Ireland will be attractive to multinationals well into the future. ”

Facebook said in a statement that the company has long called for a reform of global tax rules.

“We recognize that this can mean we pay more taxes and in different places. The tax system must enjoy both public confidence and provide certainty and stability for businesses. We are pleased with the growing international consensus, ”said the company’s global affairs officer Nick Glegg.

Agreement details are due to be finalized at G20 meetings later this autumn. Countries should transpose the agreement by 2023.

In the United States, for example, access to the treaty has not been kept clear, as more than half of the senates have to get behind it.

Swiss Ministry of Finance commented recently that a schedule is not possible.

French Finance Minister Le Maire said France would use the EU presidency in the first half of 2022 to get the treaty translated into law in an EU of 27 countries.

In Finland the level of corporate tax is 20%.

The Treasury minister Annika Saarikko (middle) recently stated to Yle, the minimum tax of 15% does not bring direct tax reduction pressures to Finland. According to him, the effects of the tax agreement on Finland are still difficult to assess.

Experts recently assessed to HS that the agreement may be beneficial for Finland, but the effects may not be significant.

Read more: A minimum corporate tax would curb the tax planning of large companies, believes a Finnish professor and EK’s tax director – Finland can benefit from the G7 proposal

Correction: The article previously erroneously stated that Republicans would have a majority in the U.S. Senate.

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