Most countries around the world are nearing a milestone in a historic landmark agreement led by the OECD that will pay international companies an additional বিল 100 billion in corporate taxes and relocate most of their tax bills to countries where they actually conduct their business.
The technical talks, which hit the first of July, will end in Paris late Friday night for details of the plan. Those close to the negotiations expect significantly lower holdouts than in nine countries – out of a total of 140 – which rejected the general position in July.
In a sign that the holdout countries are coming to the board, EU member Hungary agreed to join on Friday, while Estonia and Ireland signed an emerging agreement late Thursday night. These participants pave the way for a consensus that the EU should transform the agreement from its 2-member bloc into common EU law.
The agreement will be the first fundamental change to the corporate tax system on the border in a century and will be seen as a fierce competition between countries to attract football profits that will impose a minimum global tax rate of 15 percent to end. Some countries resist the agreement for fear of harming economic models built on relatively low taxes.
Not everyone will be happy when the deal ends. Developing countries say they still do not receive a fair percentage of taxable profits from multinational companies that operate among them.
Many countries doubt that the administration of US President Joe Biden will be able to get the OECD agreement approved in Congress. In addition, agreements with other countries to impose digital tariffs on US technology companies will be suspended.
Several countries, such as France, the United Kingdom and India, have moved to introduce such digital service taxes, targeting technology companies such as Amazon, Google and Facebook, arguing that these technology giants pay very little local tax on their profits because they have other jurisdictions. Booked. .
Nevertheless, U.S. Treasury Secretary Janet Yellen called for the removal of all unilateral digital services taxes as part of the agreement. Despite opposition from several countries, the final term is expected to include US approval and an implementation plan to determine steps to eliminate the digital services tax on Friday.
“We need to reach an agreement on the line first and then think about implementation,” said an official close to the talks.
The Irish deal on Thursday removed a significant hurdle. Due to its 12.5 percent corporate rate and its position as the preferred location for many large U.S. companies to declare profits, it objected to the plan’s basic minimum tax rate of “at least 15 percent.” However, Dublin has been exempted from removing the words “at least” from the final text.
Estonia also agreed late Thursday night that it had found that “the minimum tax would not change anything for most Estonian entrepreneurs and … only applies to organizations supporting large international groups,” Prime Minister Kaza Kalas said in a statement.
Similarly, Hungarian Finance Minister Mihali Varga said on Friday that the country was “happy to join the MoU” because it would have its 9% corporate tax rate, the lowest in the EU, with a multinational targeting system for global taxes.
Hungary has also secured a long-term period for “material-based engraving,” under which multinationals can reduce their minimum tax-exempt profits by 7.5 percent for five years. Which was extended to 10 years.
The last area of contention is the multinationals’ percentage of profits, which can be taxed in the countries where they do business.
The July draft agreement called for a range of 20 to 50 percent. Countries that host many corporate head offices want the minimum, while developing countries where multinationals conduct their business have pushed it to 30 percent.
Oxfam’s study estimates that the exclusion of the digital service tax at 20 percent would have a negative impact on 52 developing countries. France has backed a 25 percent compromise rate.
Nevertheless, Argentina has protested the proposed deal. Economy Minister Martin Guzman said on Thursday that developing countries were “forced to choose between bad and bad. Not getting anything worse. What we are getting is bad. It is very little.”
If the countries agree on the updated text of the agreement on Friday, the agreement will be finalized at a meeting of G20 finance ministers in Washington next week, before the expected final approval at the G20 summit in Rome on October 30-31.