The world will soon have a new tax system that will be able to tax multinational companies and digital platforms that until now managed to evade a large part of their taxes. After years of intense negotiations, the Organization for Economic Cooperation and Development (OECD), the club of the richest countries in the world, announced this Thursday an agreement with 130 countries and jurisdictions to establish a minimum corporate tax of “at least 15%” on the profits of the world’s largest companies. The agreement will be endorsed next week at the summit of finance ministers of the G-20 in Venice.
After years of progress at a snail’s pace, the organization of the most industrialized countries in the world has managed to forge an agreement, which will be decisive for the global tax and business architecture. The OECD has been working for more than seven years on a scheme so that large multinationals pay taxes where they do business and not where it is cheaper for them, but the G-7 drive has been decisive in reaching a minimum agreement that will cause giants like Google, Amazon or Facebook pay their taxes. The leadership of the new US Administration of President Joe Biden and his Secretary of the Treasury, Janet Yellen, and the perseverance of the European institutions have cemented a historic agreement.
Europe has spent years trying to curb the tax advantages of multinationals. Although from Brussels it has pushed to plug the sinks through which the taxes of the multinationals escape, Europe has seen its plans frustrated because it had the enemy at home. Ireland, Luxembourg, Holland or Malta are some of the countries that offer escape routes to large international groups. Ireland, Cyprus, Hungary and Estonia are among the EU countries that have not signed the agreement.
According to the Paris-based institution, a 15% assessment could already generate about $ 150 billion in additional tax revenue. Added to this are “additional benefits” that will arise from the “stabilization of the international tax system and greater fiscal certainty for taxpayers and administrations.”
Commissioning for 2023
“After years of intense work and negotiations, this landmark package will ensure that large multinational companies pay their fair share of taxes everywhere,” said OECD Secretary General Mathias Cormann. According to the Australian, who has only been in office for a month, the agreement, which has yet to be ratified by the governments involved, “accommodates the different interests at the negotiating table, including those of small economies and developing jurisdictions. ”.
In announcing the agreement, Cormann stressed the importance that the final agreement with “all” the members is reached in the times planned for this year. According to the OECD calendar, the final deadline for finalizing the technical details of the agreement is October 2021. Its effective implementation should be ready in 2023.
The announcement has been quickly welcomed by some of the countries most involved in a negotiation that has strained international relations for years. The French Minister of the Economy, Bruno Le Maire, has welcomed the “most important international tax agreement in a century”. It is an “ambitious, global and innovative” agreement that manages to “broadly bring together the States of the entire planet”, he said in a brief statement, in which he also promised to redouble efforts and contacts to “convince the last reluctant countries ”.
Although key giants such as China or the United States are among those that have already given their approval to the agreement – after the 180 degree turn given with the arrival of the Biden Administration – there are still nine countries missing out of the 139 members of the Inclusive Framework. , in which the negotiation has been developed, like Ireland, which with its low tax rate has managed to attract in recent years some of the giants that now must increase their contributions. Nor is Hungary on the list of the original signatories.
The agreement establishes a double device to “guarantee that large multinational companies pay taxes where they operate and generate profits,” explained the OECD. The first pillar “redistributes” some tax rights of large multinationals, including digital giants, from their countries of origin to the markets where they operate and generate profits, regardless of whether they have a physical presence in these. The organization estimates that this will generate more than $ 100 billion in tax benefits annually.
The second pillar seeks to introduce a minimum global corporate tax – for now of at least 15%, according to this agreement yet to be ratified – that “countries will be able to use to protect their tax bases.” This will generate, according to official estimates, about $ 150 billion in additional tax revenue. The current practices, without any international agreement, subtract about 200,000 million each year from the public coffers of the States, according to an OECD study.
For US President Joe Biden, “with a global minimum tax, multinational corporations will not be able to continue to confront countries to force them to lower their rates and protect their profits at the expense of public revenues,” he said in a statement. . For his Secretary of the Treasury, Janet Yellen, now “we have the opportunity to build a global and domestic tax system that allows American workers and companies to compete and win in the world economy.”
“The fact that 130 countries around the world, including all of the G20, have joined represents a step forward in our mission to reform global taxation,” said British Finance Minister Rishi Sunak, whose country currently presides over the G7 club, reports the Agence France Presse.