WASHINGTON – The biggest sweep of the international tax system in a century is set to take a significant step this week, with nearly 1,140 countries, including Ireland, expecting the global minimum tax rate to be fixed at 15 percent.
Negotiators were on the verge of agreeing to the rate on Thursday ahead of Friday’s meeting at the Organization for Economic Co-operation and Development, the global tax negotiating body. The tax rate has been the subject of intense discussion for months. If enacted, it could help end decades of competition over corporate taxes that have enriched tax havens and put an end to revenue-generating countries.
The government has been discussing such tax overhauls for many years; Negotiations have gained momentum this year under the Biden administration, which is also following changes in its internal corporate tax rates. The structure under consideration includes a 15 percent global minimum tax that each country will accept, and new rules that will force technology giants like Amazon and Facebook and other large global businesses to pay taxes on countries selling their products or services, even if they have no physical presence. .
Ahead of Friday’s meeting, the negotiators are arguing over the language of a joint statement describing tax rates, exceptions for certain companies, and implementation durations, which some countries want to release year after year. European holdouts such as Ireland, Hungary and Estonia have come under intense pressure in recent months to join the deal, which would require the approval of 27 EU countries.
After weeks of heated negotiations and pressure from the United States and France, Ireland, a major holder of the agreement, Prime Minister Michael Martin told the Irish cabinet on Thursday that he was ready to accept the rate at only 15 per cent. Applies to multinational giants like Facebook and Apple, but not to Irish companies operating in Ireland.
“I believe that where we now represent a balanced and fair compromise, which reflects the interests and input of the many countries involved in the negotiations,” said Irish Finance Minister Pascal Donoho. Said Thursday.
Ireland has a 12.5 per cent lower corporate tax rate and a tax system that has helped companies around the world avoid paying taxes in other countries where they make a profit. It has added billions of euros to Ireland’s tax coffers and created millions of jobs.
Mr Don Donoho said small domestic companies with annual revenues of less than 50 750 million would be exempt from higher taxes, or 160,000 businesses in Ireland.
People with knowledge of the negotiations said that while the 15 percent rate is basically a deal, some of the world’s largest countries continue to fight for concessions to reduce its impact on long-term economic models that have helped attract investment and create jobs.
French Finance Minister Bruno Le Maire told CNBC on Wednesday that “I am fully committed to paving the way for a full-fledged reduction.”
Despite growing support for the agreement, concerns remain about how it will be implemented and whether it will be implemented equally globally.
India, China, Estonia and Poland have said that minimum taxes could undermine their ability to attract investment, such as research and development credit and special economic zones that offer tax breaks to investors. For example, China has long used special economic zones with low tax rates to attract foreign investment, which has been a boon for its economic development.
The United States is one of the strongest supporters of the agreement, but it faces challenges in ensuring that the Biden administration’s commitments to Congress are implemented. Mr. Biden’s economic program is stalled, and Democrats are trying to figure out how to push through changes to the tax code that will ensure the United States complies with the international treaty it is trying to broker.
The Treasury Department declined to comment on the details of the agreement, noting that talks are still ongoing, but expressed hope that an agreement would be finalized when leaders of the Group of 20 meet in Rome later this month.
Treasury Secretary Janet L. He added that the agreement would help create more jobs and investment in the United States and benefit workers.