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(Reuters) – PARIS, July 6 (Reuters) – Despite the fact that 130 nations have agreed to alter the way multinationals are taxed, governments trying to cease a race to the bottom on international corporate tax face a lengthy path paved with potential political hazards. Almost all 139 nations participating in last week’s negotiations at the Organisation for Economic Cooperation and Development (OECD) in Paris endorsed ideas for new rules on where firms’ earnings are taxed, with a rate of at least 15%. find out more With the agreement’s ink hardly dry, euphoric politicians in higher-tax countries declared that the “biggest important international tax pact in a century,” as French Finance Minister Bruno Le Maire put it, had put an end to tax competition among governments. The pact is set to be endorsed by G20 finance ministers during talks in Venice on Friday and Saturday, adding impetus to a worldwide campaign that pushed G7 ministers to back a clampdown on tax havens, including the British Virgin Islands, in June. find out more The new OECD guidelines are set to take effect in 2023, but countries must agree on the final details by October so that tax codes may be amended the following year – and some signatories, like India and Switzerland, have raised objections since then. Given that several countries required years to pass a previous, less far-reaching modification to international tax treaties, a 2023 implementation could be optimistic. The greatest vehicle for enforcing the laws in the European Union, the world’s largest trade bloc in terms of consumer wealth, would be an EU statute. It’s possible that this will happen under France’s six-month presidency in the first half of 2022. However, as with all EU tax decisions, this would require unanimous support from member states, and none of the low-tax countries would be willing to do so. The OECD accord was endorsed by Estonia, Hungary, and Ireland. “The remaining three countries will be put under pressure to adjust their positions,” a person close to the tax talks said. According to another source, while the Irish and Estonians may be persuaded, the Hungarians would be more difficult to persuade. Cyprus, which was not a participant in the OECD talks but is an EU member, will have to be persuaded as well. According to Peter Vale, an international tax partner in Grant Thornton’s Dublin office, there is nothing that governments like Ireland can do in the end to prevent the deal from going ahead. “The goal is that Ireland and other nations, including those that have signed up to it, would be able to exercise some influence and impact on that rate, possibly capping it at 15%. That’s probably something Ireland can live with “Added he. APPROVAL IN THE UNITED STATES However, there are additional issues that could arise. The European Commission is to unveil plans for a digital services fee this month, which will be needed to pay the EU’s 750 billion euro ($890 billion) post-pandemic recovery fund, but which could irritate Washington. find out more The US government wants countries to remove existing national digital services levies, which it believes unfairly target Silicon Valley corporations, as part of the broader agreement. Brussels has argued that the new fee is a broad-based levy, not a tax, and that it will mostly affect European businesses. Meanwhile, the US administration is focused on enacting President Joe Biden’s proposed tax increases at home, which include a 15% minimum corporation tax rate. The fact that 130 countries have signed on should dispel Republican claims that rising corporate taxes will harm the US if low-tax jurisdictions do not follow suit, according to White House economic adviser Brian Deese. find out more The Biden administration looks to be planning to enact its tax reforms through a Democrat-only bill. However, it is unclear whether Washington would need to amend any bilateral tax treaties, which would necessitate a two-thirds Senate majority. (1 dollar = 0.8424 euros) Mark John contributed additional reporting, while Mark John and John Stonestreet edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

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