On Thursday, most of the countries negotiating a global overhaul of cross-border taxation of multinationals have backed plans for new rules on where companies are taxed and a tax rate of at least 15% after two days of talks.
The Paris-based Organisation for Economic co-operation and Development, and is the host of the talks, said a global minimum tax of at least 15%, could yield about $150 billion in additional tax revenue each year.
Over 130 nations who account for more than 90% of the world’s GDP are in support for the agreement in the ongoing negotiations.
The new rules, which is the largest international corporations, are responsible for the tax on the transfer of the rights to the more than $ 100 billion in the country in which the profits are to be collected.
No More Pitting Countries Against Each Other
In a statement U.S. President Joe Biden said that multinational corporations will no longer be able to pit countries against one another in a bid to push tax rates down in the light of global minimum tax in place.
He said that no longer shall it be possible to avoid paying their fair share by hiding profits generated in the United States, or any other country, in lower-tax jurisdictions.
It was difficult to get Beijing on board and there were tough negotiations for the same. There were no China-specific carveouts or exceptions in the deal said an U.S. administration official.
The minimum ??r??r?te t?x d?es n?t require ??untries t? set their r?tes ?t the ?greed fl??r but gives ?ther ??untries the right t? ???ly ? t??-u? levy t? the minimum ?n ??m??nies’ in??me ??ming fr?m ? ??untry th?t h?s ? l?wer r?te.
The Gr?u? ?f Seven ?dv?n?ed e??n?mies ?greed in June ?n ? minimum t?x r?te ?f ?t le?st 15%. The br??der ?greement will g? t? the Gr?u? ?f Twenty m?j?r e??n?mies f?r ??liti??l end?rsement ?t ? meeting in Veni?e next week.
A statement from countries that backed the agreement said that the technical details shall be agreed by October so that the new rules can be implemented by 2023.
Of the nine countries that have not signed on to the agreement in the low-tax EU countries such as Estonia, Ireland, Hungary, Peru, Barbados, and St. Vincent and the Grenadines, Sri Lanka, Nigeria, and Kenya.
Don’t take the risk of being isolated, as not only are all of the major economies have signed up, as well as many well-known tax havens such as Bermuda, the cayman islands and the British virgin islands.
The irish Minister for Finance Pascal Donohoe, which, in the country, it attracts a lot of big American companies from its 12.5% corporate tax rate, he said that he was “not in a position to join the consensus, but it would have to try to find an outcome that can be supported.
In the EU, the deal will require the approval of the EU-law, and most likely during the French presidency of the european union in the first half of 2022, and it requires the full support of all EU member states.
The acceptance of the proposal, as in the most important international tax treaty, an agreement has been reached over a century, the French Finance Minister, Bruno Le maire, said that he would try to win over those who are waiting.
“I’ll ask them to do anything and everything possible to be at this historic agreement, which has been largely supported by the majority of countries,” he said, adding that all of the major digital companies will be subject to this agreement.
Thresholds
The new minimum t?x r?te ?f ?t le?st 15% w?uld ???ly t? ??m??nies with turn?ver ?b?ve ? 750-milli?n-eur? ($889-milli?n) thresh?ld, with ?nly the shi??ing industry exem?ted.
The new rules ?n where multin?ti?n?ls ?re t?xed ?ims t? divide the right t? t?x their ?r?fits in ? f?irer w?y ?m?ng ??untries ?s the emergen?e ?f digit?l ??mmer?e h?d m?de it ??ssible f?r big te?h firms t? b??k ?r?fits in l?w t?x ??untries reg?rdless where they m?ney w?s e?rned.
??m??nies ??nsidered in s???e w?uld be multin?ti?n?ls with gl?b?l turn?ver ?b?ve 20 billi?n eur?s ?nd ? ?re-t?x ?r?fit m?rgin ?b?ve 10%, with the turn?ver thresh?ld ??ssibly ??ming d?wn t? 10 billi?n eur?s ?fter seven ye?rs f?ll?wing ? review.
Extr??tive industries ?nd regul?ted fin?n?i?l servi?es ?re t? be ex?luded fr?m the rules ?n where multin?ti?n?ls ?re t?xed.
Im?lement?ti?n ?f the de?l ??uld still ?r?ve r??ky n?t le?st in the U.S. ??ngress, where Re?resent?tive Kevin Br?dy, the t?? Re?ubli??n ?n the t?x-writing U.S. H?use W?ys ?nd Me?ns ??mmittee, des?ribed it ?s “? d?nger?us e??n?mi? surrender th?t sends U.S. j?bs ?verse?s, undermines ?ur e??n?my ?nd stri?s ?w?y ?ur U.S. t?x b?se.”
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