By David McHugh and Danica Kirka | Associated press
LONDON – Nearly 140 countries have agreed on a tentative deal that would make sweeping changes to the way large multinational corporations are taxed and deter them from hiding their profits in offshore havens where they pay little or no money. tax.
Under the deal announced on Friday, countries would adopt a 15% global minimum corporate tax on the largest companies operating internationally, raising around $ 150 billion for government coffers when implemented. .
President Joe Biden has been a driving force behind the deal as governments around the world seek to boost revenues in the wake of the COVID-19 pandemic.
“Today’s agreement represents a unique achievement for economic diplomacy,” Treasury Secretary Janet Yellen said in a statement. She said it would end a “race to the bottom” in which countries outbid with lower tax rates.
“Rather than compete on our ability to deliver low corporate rates,” she said, “America will now be competing on the skills of our workers and our ability to innovate, which is a race. that we can win. ” The deal was announced by the Paris-based Organization for Economic Co-operation and Development, which hosted the talks that resulted in it.
The agreement faces several hurdles before it can enter into force. U.S. approval of related tax legislation proposed by Biden will be critical, especially since the United States is home to many of the largest multinationals. A rejection by Congress would cast uncertainty over the entire project.
The agreement is an attempt to address the ways in which globalization and digitization have changed the global economy. Along with the minimum tax, it would allow countries to tax a portion of the profits of businesses whose activities, such as online retailing or web advertising, do not involve a physical presence.
Ireland on Thursday announced it would join the deal, abandoning a low-tax policy that has led companies like Google and Facebook to locate their European operations there.
Although the Irish deal was a step forward for the deal, developing countries raised objections and Nigeria, Kenya, Pakistan and Sri Lanka said they would not sign.
Poverty alleviation and tax fairness advocates have said most of the new revenue will go to richer countries and offer less to developing countries that rely more on corporate taxes. The G-24 group of developing countries said without a larger share of revenue from reallocated profits, the deal would be “sub-optimal” and “unsustainable even in the short term.”
The deal will be taken up by the Group of Finance Ministers next week and then by G-20 leaders for final approval at a summit in Rome in late October.
Countries would sign a diplomatic agreement to implement the tax on companies that do not have a physical presence in a country but make a profit there, for example through digital services.
The second part of the agreement, the overall minimum of at least 15%, would be promulgated by individual countries according to model rules developed at the OECD. A complementary provision would mean that the tax avoided abroad would have to be paid in the country. As long as at least the major headquarters countries applied the minimum tax, the deal would have most of the desired effect.
McHugh reported from Frankfurt.