A new global corporate tax rate of at least 15% is expected to become a reality in 2023 after Hungary becomes the last European country to accept a proposal from the Organization for Economic Co-operation and Development (OECD).
After Ireland and Estonia joined the effort on Thursday, Hungary opted to sign the global tax after securing a 10-year transitional period with its own special rate.
The deal has now been ratified by 136 countries, the OECD said on Friday.
Only Kenya, Nigeria, Pakistan and Sri Lanka are still resisting the 140 countries involved in the OECD negotiations.
What were the reactions?
The four-year-old negotiations received a huge boost when US President Joe Biden voiced his support earlier this year.
“The establishment, for the first time in history, of a strong global minimum tax will finally be a level playing field for American workers and taxpayers, as well as for the rest of the world,” said the president American in a press release.
US Treasury Secretary Janet Yellen said the deal would lead to “decades of increased prosperity”, calling it “a unique achievement for economic diplomacy.”
In a statement to reporters, German Finance Minister Olaf Scholz said it was “another important step towards more tax justice”.
European Commission President Ursula von der Leyen called it a “fundamental fairness issue”, tweeting that “we owe it to our citizens”.
Global tech giant Google said the new tax deal was “an important step forward” and hoped the “momentum continued”.
But the Swiss finance ministry said small economies like its own would be unable to introduce the tax by 2023, while Poland raised concerns about investments.
Oxfam criticized the deal for its “complex web of exemptions”. The 15% rate would do “little or nothing to end harmful tax competition,” the organization said in a statement.
What is the overall plan for tax reform?
The United States had proposed a minimum corporate income tax of 15% to prevent tax havens from competing to attract big business.
The rate would affect less than 10,000 multinational companies, those with annual turnover above 750 million euros ($ 890 million).
At a time of economic crisis caused by the COVID-19 pandemic, the OECD has said it could increase government coffers by about $ 150 billion a year. More than $ 125 billion in corporate profits would also be shifted to countries where these large companies generate their income.
The OECD said the deal would then be submitted to G20 leaders for approval at the end of the month before being enacted by 2023.
jc / rt (Reuters, AFP, dpa)