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Friday, December 3, 2021

The deal reached a 15% global minimum corporate tax

By David McHugh and Danica Kirka | Assistant Printing Press

LONDON – Nearly 1,140 countries have agreed to a temporary agreement that would drastically change the way big multinationals are taxed and prevent them from withholding profits in their offshore shelters where they pay little or no tax.

Under the agreement announced Friday, the countries will enact a 15% global minimum corporate tax on the largest, internationally active companies, which, once implemented, will raise an estimated 150 150 billion in government funding.

President Joe Biden was one of the driving forces behind the deal as governments around the world sought to raise revenue in the wake of the Kovid-1 pandemic epidemic.

“Today’s agreement represents a generation of success for economic diplomacy,” Treasury Secretary Janet Yellen said in a statement. He said it would end a “bottom competition” where countries outperformed each other by lowering tax rates.

“Instead of competing for our ability to give low corporate rates,” he said, “America will now compete with the skills and innovation of our employees, a competition we can win.” The agreement was announced by Paris, an organization based on cooperation and economic development, which led to the talks.

Several obstacles were encountered before the agreement took effect. U.S. approval of the related tax laws proposed by Biden will be important, especially since the United States is home to many large multinationals. The rejection of Congress will cast uncertainty on the whole project.

The agreement seeks to address the ways in which globalization and digitization have changed the world economy. In addition to the minimum tax, it will allow countries to tax some of the earnings of companies whose activities, such as online retail or web advertising, do not involve physical presence.

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On Thursday, Ireland announced that they would join the deal, rejecting a low-tax policy that allowed companies like Google and Facebook to base their European operations there.

Although the Irish agreement was one step ahead of the agreement, developing countries objected and Nigeria, Kenya, Pakistan and Sri Lanka indicated they would not sign up.

Anti-poverty and tax fair advocates say the lion’s share of the new revenue will go to rich countries and offer less to developing countries that are more dependent on corporate taxes. The G-24 Group of Developing Countries said that without a large share of revenue from re-allocated profits, the agreement would be “sub-optimal” and “not sustainable in the short term.”

The agreement will be adopted by a group of 20 finance ministers next week and then the G20 leaders at a summit in Rome at the end of October for final approval.

Countries that do not have a physical presence but make a profit, such as through digital services, will sign a diplomatic agreement to implement the tax.

The second part of the agreement, the global minimum of at least 15%, will be formulated by the countries individually according to the model rules made in the OECD. The top-up provision means tax evasion abroad must be paid at home. As long as at least the major countries implement the minimum tax, the agreement will have its desired effect.

McHugh reports from Frankfurt.

World Nation News Deskhttps://www.worldnationnews.com
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