Almost 140 countries, including some of the most powerful, have agreed on a comprehensive reform of the global rules for taxing multinational corporations with the aim of suppressing tax havens and stopping the race to reduce taxes, which many countries attract companies, while others remain without the necessary income, the world media write.
The triumph of the OECD
More than 130 countries have signed a global agreement on the reform of corporate taxation with the aim of eliminating tax havens, with the estimate that it will bring more than 150 billion dollars from multinational companies, the Financial Times (The Financial Times) points out.
The agreement, which, according to the British newspaper, represents the biggest reform of corporate taxation in more than a century, foresees a 15 percent global minimum effective tax rate for corporations in addition to new rules that should force multinational companies to declare profits and pay more taxes in the countries where they operate. .
The agreement is a triumph for the Organization for Economic Co-operation and Development (OECD), which for many years has been trying to suppress tax evasion among corporations, assesses the Financial Times.
As part of the deal, 136 countries also agreed to a two-year ban on imposing new taxes on tech companies such as Google and Amazon, which could help the Joe Biden administration in its bid to ratify the deal in the US.
The stakes are high for the U.S. and countries that have imposed digital services taxes on Silicon Valley tech companies, the Financial Times reports, adding that if the U.S. Congress does not accept the deal, those countries could continue to apply digital taxes, triggering trade disputes with Washington.
A huge change
The agreement reached after a decade of talks under the auspices of the OECD marks a huge change in the approach when it comes to the taxation of large global companies, the BBC assesses in an analysis.
In the past, countries often competed with each other to offer attractive deals to multinational corporations, arguing that the companies would open factories and create new jobs in return for lower taxes.
However, the giants of the new digital age have been adept at simply shifting profits from the regions where they operate to those where they will pay the lowest taxes, which, the BBC points out, has been good for tax havens and bad for everyone else.
The new system aims to minimize opportunities for profit shifting and ensure that the largest companies pay at least some taxes where they do business, not where they choose to be based.
The fact that 136 countries supported the agreement is a success in itself, but, adds the BBC, there will inevitably be both losers and winners.
Two pillars
After years of missed deadlines and wrangling over how to tax tech giants, the deal agreed on Friday, Oct. 8, comes close to ending what U.S. Treasury Secretary Janet Yellen called a global "race to the bottom" among countries luring companies with lower and lower tax rates, according to Bloomberg.
The agreement marks a victory in global negotiations that have been nearly stalled during the term of President Donald Trump and which have escalated into trade tensions with the introduction of unilateral measures and threats of retaliation, according to Bloomberg, adding that the deal could bring new revenues to governments facing with a large debt burden after the COVID-19 pandemic.
The multi-year negotiations at the OECD were divided into two so-called pillars, Blumberg points out.
The first deals with issues of shifting profits for taxation purposes, while the second pillar focuses on the global minimum tax rate for corporations.
The signatories of the agreement include all members of the Group of 20, the European Union and the OECD, while of the countries involved in the negotiations, only Kenya, Nigeria, Pakistan and Sri Lanka, according to the OECD statement, did not sign the agreement.
Uncertainty about whether the US will ratify the agreement
The agreement aimed at curbing tax havens represents the culmination of years of arduous negotiations that were revived this year after Biden took office as president and renewed the US commitment to multilateralism, according to The New York Times.
The finance ministers of the countries involved in the negotiations have rushed to finalize the agreement, which they hope will reverse a decades-long race to cut corporate taxes that encouraged companies to shift profits to low-tax jurisdictions, thus depriving other countries of the money they are entitled to. needed to build infrastructure and fight global health crises.
The US, which has proposed the lowest corporate tax rate of 15 percent, has long sought ways to reduce incentives to shift profits abroad to pay less in taxes. Now, as the Biden administration prepares to try to raise corporate taxes, the introduction of a global minimum tax is key to preventing companies from moving their headquarters overseas.
But Republicans, who oppose Biden's plans to raise taxes at home, immediately opposed the global accord and threatened to block it in Congress, hinting at a battle when it comes to ratifying the agreement.
As the New York Times writes, European countries will nervously watch whether Biden will succeed in ensuring that the US adheres to the agreement. If that happens, France, Britain and other countries have said they will scrap the taxes they have imposed on Silicon Valley companies, which almost set off a transatlantic trade war.
The agreement should be formally accepted this Sunday when the finance ministers of the Group of 20 largest world economies meet in Washington, and it is expected to be signed by national leaders at a summit in Rome at the end of October.
"Toothless"
Some developing countries that have demanded a higher rate of taxation have said that their interests have been ignored in order to adapt the agreement to richer countries, while NGOs have criticized the many exemptions that exist in the agreement, with Oxfam rating the deal as "virtually toothless". , according to Reuters.
While the ink is barely dry on the deal, some countries have already expressed concerns about the deal's implementation. The Swiss Ministry of Finance requested that the interests of small economies be taken into account and said that the implementation date, i.e. 2023, is impossible.
At the same time, many developing countries have indicated that their interests are being neglected and that rich countries are likely to continue to share the spoils of FDI.
Argentina's Economy Minister Martin Guzman said before the deal was reached that the proposals forced developing countries to choose between "bad and worse".
Non-governmental and humanitarian organizations such as Oxfam have assessed that the agreement will not end the existence of tax havens.
"The tax devil is in the details, including the complex web of exemptions," Oxfam's Susana Ruiz said in a statement.
"At the last minute, a colossal ten-year grace period was introduced on the global corporate tax of 15 percent, and the additional loopholes leave it virtually toothless," added Ruiz.
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