After the former tax-less country, Ireland, surrendered, a major obstacle to global corporate tax reform was removed.
The Organization for Economic Co-operation and Development (OECD) concluded technical talks after years of negotiations with an agreement at a meeting in Paris on Friday. Internationally active companies, as declared by the OECD, are required to pay at least 15 percent tax regardless of their headquarters. The regulation will take effect from 2023. Of the 140 OECD members, only Kenya, Nigeria, Pakistan and Sri Lanka have not yet joined.
In July, G20 finance ministers decided on two innovations: companies operating internationally should be taxed at a “minimum” of 15 per cent, depending on where they are located. If a subsidiary company pays lower taxes abroad, its own country can collect the difference. This is to prevent profits from being transferred to tax centers. Also, large companies should no longer be taxed not only in their home country but also where they do good business. The OECD estimates that taxes alone account for about $ 150 billion (approximately ബ 130 billion) of tax revenue worldwide.
Scholes: An important step towards a fair tax
“Today we have taken another important step towards a more fair tax,” said Federal Reserve Minister Olaf Scholes (SPD). “In particular, the recognition of the states of the European Union is a great achievement and will ensure that this reform can be implemented expeditiously across the European Union.” European Commission President Ursula von Der Lane spoke about a historic moment. “This is an important step towards improving our global tax system.”
U.S. Secretary of State Janet Yellen hailed the deal as an achievement of a generation of economic diplomacy. “We have turned the tense discussions into decades of increased prosperity – for America and for the world,” Yellen said after a message from his ministry. Your French colleague Bruno Le Meyer spoke about an important agreement for the economies of countries. “This agreement paves the way for a tax revolution.”
Well known tax centers such as the Cayman Islands are now included in the agreement. Similarly, Ireland succumbed to international pressure just before the OECD agreement. Dublin’s cabinet on Thursday evening decided to raise the tax rate on companies with a turnover of more than 750 million euros from 12.5 percent to 15 percent. Large digital corporations have their European headquarters in Ireland, thus avoiding further disputes with the G20 Group’s top financial powers.
Donohue: “This is the right decision.”
Dublin’s commitment was broked by the OECD. Irish Finance Minister Pascal Donohue said it was a far-reaching reform of the global tax framework. “It’s the right decision. It’s a sensitive and practical decision.” The government of Dublin estimates its losses from tax increases of between 800 million and 2 billion euros per year. In addition to Ireland, Estonia and Hungary from the European Union have so far opposed the reform.
As Estonian Prime Minister Kaja Kallas announced on Thursday evening, there has been a change in Estonia as well. “We have been in intensive discussions every summer to achieve a situation that affects Estonian entrepreneurs as much as possible through this global tax,” Kallas said.
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