In a remarkable deal, the Organization for Economic Co-operation and Development announced a new agreement on corporate tax rates, after years of disagreement, according to initial report from CNBC.
The group of nations has decided that a global minimum corporate tax rate of 15% will be introduced in 2023, which means a colossal change for less economically secure countries like the Republic of Ireland, which stressed low corporate tax rates to attract large companies like Amazon. .
Termination of the “race for corporate taxation”
“The landmark deal, negotiated by 136 countries and jurisdictions representing more than 90% of world GDP, will also redistribute more than $ 125 billion in profits from about 100 of the world’s largest and most profitable MNEs, ensuring that these companies pay a fair share of taxes wherever they operate and generate profits, “the OECD said in a statement. statement from friday. This big deal came after some changes were made to the original text. Most importantly, there is a clause stating that the new rate of 15% will not be increased at a later date and that the new rates will not affect small businesses.
The last appointment was key to attracting Ireland, who has long opposed raising corporate taxes, in the deal. Hungary, which also opposed the global tax minimum, also emerged after it was confident that implementation would be slow and methodical. All countries must now develop the means to introduce the new tax rate by 2023. This is a “once-in-a-generation economic diplomacy achievement,” Janet Yellen, finance minister, said in a statement. They praised the many states that “have decided to end the corporate tax race” and stressed the expectation that Congress will complete the reconciliation process to implement this new deal quickly in the United States, according to CNBC report.
Corporations made huge profits during the COVID-19 crisis
“Creating an international tax policy is a complex issue, but the mysterious language of today’s agreement disproves how simple and huge the stakes are: When this deal is accepted, Americans will find the world economy a much easier place to find work, to make a living. , or expand your business, “Yellen said in a statement. And the agreement does more than impose a minimum corporate tax rate: It also requires companies to pay taxes. wherever they work, instead of just where their headquarters are. But exactly how much corporations will owe to states in their global jurisdictions has not yet been finalized.
This decision came in part as a result of the COVID-19 coronavirus pandemic, which reinforced the idea of the great need for taxation of large corporations, which earn enormously during global blockades, while millions lose their livelihoods. This decision is also in line with promises made at an early stage by the Joe Biden administration, which spoke of a desire to raise taxes on the rich. 15% tax does not come close to an equal share of the wealth acquired by large corporations during the greatest economic and social tragedy of this century, but it is better than nothing.
It was a final story and was regularly updated when new information became available.