130 Countries Agree On The New Minimum Global Corporate Tax Of 15%
After two days of talks, most of the countries in the world have come to an agreement on Thursday on renovating the cross-border taxation of multinationals. Under the new regulation, the companies will have to pay at least 15% tax.
The event was organized by the Organisation for Economic Cooperation and Development from Paris. According to the new plan, nearly $150 billion can be earned additionally in global tax revenues annually.
A total of 130 countries joined the talks representing over 90% of global GDP.
The US president Joe Bidden said that with a fixed minimum 15% tax the biggest multinational companies will not be able to influence and push countries to compete with each other to lower the tax rates.
As per reports, making China come to an agreement was quite difficult.
The G7 members agreed on the minimum taxation system in June. They will be discussing the topic in detail next week at a meeting in Venice. The technical details will be discussed by October and they hope to implement the new system by 2023.
Nine countries have not signed the deal. They are Hungary, Ireland, Peru, Saint Vincent, Barbados, Estonia, Nigeria, Kenya, and Sri Lanka.
Major tax havens like Cayman Islands, Bermuda, and the British Virgin Islands also signed the agreement.
Irish Finance Minister Paschal Donohoe said that the country is not ready to join the deal. Notably, the country has a lower corporate tax rate of 12.5% that has attracted many organizations all over the world.
In order to pass the deal in the European Union, they will need unanimous support from all the members of the EU.
French Finance Minister Bruno Le Maire said he will try to convince the ones who did not agree with the deal. He also considers the deal as the most significant tax deal of the century.
He also said that the agreement will cover all the biggest digital corporations.
Companies with a turnover of 750-million euro threshold will come under the new tax rule of a minimum of 15%. The shipping industry is excluded from the new regulation.
The new rule will divide their privilege to tax their profits in a more transparent way among the countries. Contemporary digital commerce allowed the big tech firms to earn profit in the countries with low tax no matter they earned the money.
The companies that will come under the new rule are with worldwide turnover of more than 20 billion euros. Their pre-tax profit margin must be more than 10%. And after seven years following a review, their turnover threshold must come down to 10 billion euros.
Oil, minerals, and metal extraction companies and regulated financial services will not come under the new tax rules.
Representative Kevin Brady, from the US Congress, has said that the new rule is quite dangerous and it will cause US jobs to go to the people overseas. He fears that the US tax base will be stripped away.
