A 15% global corporate tax set to go into effect in 2023, but Oxfam called it a capitulation to tax havens like Ireland
A global push to enact a minimum international tax on large corporations came closer to reality on Friday as one of the last holdouts, Hungary, agreed to join a reform that now has 136 countries.
The agreement brokered by the Organization for Economic Co-operation and Development (OECD), which sets a global tax of 15%, aims to prevent international companies from reducing their tax bills by registering in countries with low rates.
“Today’s agreement will make our international tax agreements fairer and more efficient,” said OECD Secretary General Mathias Cormann. “This is a great victory for effective and balanced multilateralism.
Hungary’s announcement came a day after another key opponent, Ireland – whose low tax rate attracted Apple Inc and Alphabet Inc’s Google – caved in and agreed to join the global effort.
Along with Hungary, 136 countries representing 90% of global GDP have now signed on, the Paris-based OECD said.
Estonia also joined the reform on Thursday.
The OECD has said Kenya, Nigeria, Sri Lanka and Pakistan are the latest holdouts among the 140 countries that negotiated the tax.
Pakistan was on a previous list of signatories.
The organization said the countries aim to sign a multilateral convention next year, with a view to implementing the reform in 2023.
The years-long talks were given a boost earlier this year when the administration of US President Joe Biden backed a global minimum tax rate of at least 15%.
The COVID-19 pandemic has made reforms more urgent as countries need new sources of revenue to pay for the huge stimulus packages that were rolled out during last year’s global recession.
“Today’s agreement represents a unique achievement for economic diplomacy,” US Treasury Secretary Janet Yellen said in a statement.
“Since this morning, almost the entire world economy has decided to end the race to the bottom in corporate taxation,” Yellen said.
The President of the European Commission, Ursula von der Leyen, called it a “historic moment”, saying that “all companies must pay their fair share”.
The Brussels IT and communications industry association welcomed the agreement.
It was a step “to ensure that international tax rules reflect today’s global economy,” association vice-president Christian Borggreen said in a statement. “This is an important step towards greater fairness and certainty in the global tax system. “
However, the Oxfam charity was scathing.
“Today’s tax deal was about ending tax havens for good. Instead, it was written by them, ”said Susana Ruiz, Oxfam tax policy expert. “This deal is a shameful and dangerous surrender to the low-tax model of nations like Ireland.”
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