On Friday, the Organization for Economic Cooperation (OECD) said that there has been a significant breakthrough on global corporate tax rates. Negotiations between countries around the world have been going on for years but disagreements have persisted. Finally, developed nations around the world have agreed to a 15 percent minimum corporate tax rate from 2023.
The OECD said that 136 countries have agreed to the tax reforms. This translates to over 90 percent of the Gross Domestic Product (GDP) of the world. The organization also estimated that more than $125 billion from roughly 100 of the largest global multinationals will be redistributed to all the countries where these giants operate.
Ireland, Hungary and Estonia have finally come onboard. These nations had attracted many multinationals as their tax rates have been below the proposed 15 percent. So far, only four countries have not joined the global agreement. They are Kenya, Nigeria, Pakistan and Sri Lanka.
Global entities including Amazon, Apple and Facebook whose revenues cross $867 million will have to pay the proposed tax. Other multinationals will “pay a fair share of taxes” wherever they operate, with or without a physical presence.
The recent release of the Pandora Papers has jolted countries across the world. They have realized how the wealthy and powerful have been hiding huge swaths of wealth and avoiding taxes that amount to millions of dollars using shell corporations or offshore accounts.
The G20 Leaders Summit is scheduled to take place, end October in Rome. The OECD plan is expected to be taken up at the upcoming G20 finance ministers meeting next Wednesday, in Washington DC.
In 2020, President Joe Biden had proposed to raise taxes for the rich. Treasury Secretary Janet Yellen had been in the forefront of the current OECD proposal. It remains to be seen if Biden gets support from Congress as partisan behavior is on the rise. The recent debt ceiling was raised temporarily up to early December; just before it could cause immense economic, social and political harm to the nation.