PARIS: After two days of discussions, most of the countries discussing a global revamp of multinationals’ cross-border taxation have endorsed ideas for new rules on where firms are taxed and a tax rate of at least 15%, they said on Thursday. The Paris-based Organisation for Economic Cooperation and Development, which organized the talks, estimated that a global minimum corporate income tax of at least 15% might generate an additional US$150 billion in yearly tax revenue.
It claimed that 130 countries had approved the deal at the negotiations, representing more than 90% of world GDP.
It went on to say that under new rules, taxing rights on more than US$100 billion in revenues would be shifted to the countries where the profits are earned.
“With a global minimum tax in place, multinational firms will no longer be able to set countries against each other in an attempt to lower tax rates,” said US Vice President Joe Biden in a statement.
“They will no longer be able to avoid paying their fair share by sheltering income earned in the United States or elsewhere in lower-tax nations,” he said.
In June, the Group of Seven leading economies agreed on a tax rate of at least 15%. At a summit in Venice next week, the Group of Twenty major economies will consider the deal for political approval. According to a statement from countries that backed the deal, technical details must be agreed on by October in order for the new standards to be implemented by 2023. Low-tax EU members Ireland, Estonia, and Hungary, as well as South Korea, are among the nine countries that have refused to sign. French Finance Minister Bruno Le Maire, hailing the agreement as the most important international tax agreement in a century, said he would strive to persuade those who were against.
“I implore them to do everything possible to join this historic agreement, which is widely supported by most countries,” he added, adding that the deal will cover all major digital firms.
Only the shipping industry would be excluded from the proposed minimum tax rate of at least 15%, which would apply to enterprises with turnover above 750 million euros (US$889 million).
The new regulations on where multinational corporations are taxed aim to more fairly distribute the authority to tax their income among countries.
Multinationals with a global revenue of more than 20 billion euros and a pre-tax profit margin of more than 10% would be considered in scope, with the turnover barrier potentially dropping to 10 billion euros after seven years following a review.
Extractive industries and regulated financial services will be exempt from the rules governing taxation of multinational corporations.
(1 US dollar = 0.8437 euros)
(Leigh Thomas contributed reporting; Andrew Heavens, Pravin Char, and Timothy Heritage edited the piece.)/n
