Leigh Thomas
Fri, October 8, 2021
Ministerial Council Meeting, in Paris
By Leigh Thomas
PARIS (Reuters) -A group of 136 countries on Friday set a minimum global tax rate of 15% for big companies and sought to make it harder for them to avoid taxation in a landmark deal that U.S. President Joe Biden said levelled the playing field.
The deal aims to end a four-decade-long "race to the bottom" by setting a floor for countries that have sought to attract investment and jobs by taxing multinational companies lightly, effectively allowing them to shop around for low tax rates.
The 15% floor agreed to is, however, well below a corporate tax rate which averages around 23.5% in industrialised countries.
Some developing countries that had wanted a higher rate said their interests had been sidelined to accommodate richer nations, while NGOs criticized the deal's many exemptions, with Oxfam saying it effectively had "no teeth."
The accord also promises to be a tough sell in Washington, where a group of Republican U.S. senators sent a letter to Treasury Secretary Janet Yellen saying they had serious concerns.
https://www.reuters.com/world/us/after-eu-tax-win-yellen-will-try-sell-us-republicans-global-tax-deal-2021-07-14
Negotiations have been going on for four years, with the deal finally agreed when Ireland, Estonia and Hungary dropped their opposition and signed up.
The deal aims to stop large firms booking profits in low-tax countries such as Ireland regardless of where their clients are, an issue that has become ever more pressing with the growth of 'Big Tech' giants that can easily do business across borders.
"Establishing, for the first time in history, a strong global minimum tax will finally even the playing field for American workers and taxpayers, along with the rest of the world," Biden said in a statement.
Out of the 140 countries involved, 136 supported the deal, with Kenya, Nigeria, Pakistan and Sri Lanka abstaining for now.
The Paris-based Organisation for Economic Cooperation and Development (OECD), which has been leading the talks, said that the deal would cover 90% of the global economy.
"We have taken another important step towards more tax justice," German Finance Minister Olaf Scholz said in a statement emailed to Reuters.
"We now have a clear path to a fairer tax system, where large global players pay their fair share wherever they do business," his British counterpart Rishi Sunak said.
But with the ink barely dry, some countries were already raising concerns about implementing the deal. The Swiss finance ministry demanded
'NO TEETH'
However, many developing countries have said their interests have been ignored and that wealthy nations were likely to continue dividing up
The deal aims to stop large firms booking profits in low-tax countries such as Ireland regardless of where their clients are, an issue that has become ever more pressing with the growth of 'Big Tech' giants that can easily do business across borders.
"Establishing, for the first time in history, a strong global minimum tax will finally even the playing field for American workers and taxpayers, along with the rest of the world," Biden said in a statement.
Out of the 140 countries involved, 136 supported the deal, with Kenya, Nigeria, Pakistan and Sri Lanka abstaining for now.
The Paris-based Organisation for Economic Cooperation and Development (OECD), which has been leading the talks, said that the deal would cover 90% of the global economy.
"We have taken another important step towards more tax justice," German Finance Minister Olaf Scholz said in a statement emailed to Reuters.
"We now have a clear path to a fairer tax system, where large global players pay their fair share wherever they do business," his British counterpart Rishi Sunak said.
But with the ink barely dry, some countries were already raising concerns about implementing the deal. The Swiss finance ministry demanded
that the interests of small economies be taken into account and said that the 2023 implementation date was impossible.
In the United States, meanwhile, Republican senators said they were concerned the Biden administration was considering circumventing the need to obtain the Senate's authority to implement treaties.
Under the Constitution, the Senate must ratify any treaty with a two-thirds majority, or 67 votes. Biden's fellow Democrats control only 50 seats in the 100-member chamber. And Republicans in recent years have been overwhelmingly hostile to treaties and have backed cuts in corporate taxes.
The reaction to the deal from U.S. markets was muted, with investors focused instead on the latest payrolls data. Some of the Big Tech companies, often cited by critics for seeking to lower taxes through operations overseas, welcomed the accord.
"We are pleased to see an emerging international consensus," said Nick Clegg, Facebook Inc vice president of global affairs. "Facebook has long called for reform of the global tax rules, and we recognise this could mean paying more tax, and in different places."
An Amazon.com Inc spokesperson said the company supports the "progress towards a consensus-based solution for international tax harmonization, and we look forward to their continued technical work."
Analysts at Morgan Stanley said that tech hardware, some media services, and healthcare appeared to be the most exposed to a 15% minimum tax rate.
'INCREASED PROSPERITY'
https://www.reuters.com/business/finance/what-is-global-minimum-tax-deal-what-will-it-mean-2021-10-08
In the United States, meanwhile, Republican senators said they were concerned the Biden administration was considering circumventing the need to obtain the Senate's authority to implement treaties.
Under the Constitution, the Senate must ratify any treaty with a two-thirds majority, or 67 votes. Biden's fellow Democrats control only 50 seats in the 100-member chamber. And Republicans in recent years have been overwhelmingly hostile to treaties and have backed cuts in corporate taxes.
The reaction to the deal from U.S. markets was muted, with investors focused instead on the latest payrolls data. Some of the Big Tech companies, often cited by critics for seeking to lower taxes through operations overseas, welcomed the accord.
"We are pleased to see an emerging international consensus," said Nick Clegg, Facebook Inc vice president of global affairs. "Facebook has long called for reform of the global tax rules, and we recognise this could mean paying more tax, and in different places."
An Amazon.com Inc spokesperson said the company supports the "progress towards a consensus-based solution for international tax harmonization, and we look forward to their continued technical work."
Analysts at Morgan Stanley said that tech hardware, some media services, and healthcare appeared to be the most exposed to a 15% minimum tax rate.
'INCREASED PROSPERITY'
https://www.reuters.com/business/finance/what-is-global-minimum-tax-deal-what-will-it-mean-2021-10-08
Central to the agreement is a minimum corporate tax rate of 15% and allowing governments to tax a greater share of foreign multinationals' profits.
Yellen hailed it as a victory for American families as well as international business.
"We've turned tireless negotiations into decades of increased prosperity – for both America and the world. Today's agreement represents a once-in-a-generation accomplishment for economic diplomacy," Yellen said in a statement.
The OECD said that the minimum rate would see countries collect around $150 billion in new revenues annually while taxing rights on more than $125 billion of profit would be shifted to countries where big multinationals earn their income.
Ireland, Estonia and Hungary, all low tax countries, dropped their objections this week as a compromise emerged on a deduction from the minimum rate for multinationals with real physical business activities abroad.
Yellen hailed it as a victory for American families as well as international business.
"We've turned tireless negotiations into decades of increased prosperity – for both America and the world. Today's agreement represents a once-in-a-generation accomplishment for economic diplomacy," Yellen said in a statement.
The OECD said that the minimum rate would see countries collect around $150 billion in new revenues annually while taxing rights on more than $125 billion of profit would be shifted to countries where big multinationals earn their income.
Ireland, Estonia and Hungary, all low tax countries, dropped their objections this week as a compromise emerged on a deduction from the minimum rate for multinationals with real physical business activities abroad.
'NO TEETH'
However, many developing countries have said their interests have been ignored and that wealthy nations were likely to continue dividing up
the spoils of foreign direct investment.
Argentine Economy Minister Martin Guzman said on Thursday that the proposals forced developing countries to choose between "something bad and something worse".
Campaign groups such as Oxfam said that the deal would not end tax havens.
"The tax devil is in the details, including a complex web of exemptions," Oxfam tax policy lead Susana Ruiz said in a statement.
"At the last minute a colossal 10-year grace period was slapped onto the global corporate tax of 15%, and additional loopholes leave it with practically no teeth," Ruiz added.
Companies with real assets and payrolls in a country can ensure some of their income avoids the new minimum tax rate. The level of the exemption tapers over a 10-year period.
The OECD said that the deal would next go to the Group of 20 economic powers to formally endorse at a finance ministers' meeting in Washington on Oct. 13 and then on to a G20 leaders summit at the end of the month in Rome for final approval.
Countries that back the deal are supposed to bring it onto their law books next year so that it can take effect from 2023, which many officials have said is extremely tight.
French Finance Minister Bruno Le Maire said Paris would use its European Union presidency during the first half of 2022 to translate the agreement into law across the 27-nation bloc.
(Reporting by Leigh Thomas; Additional reporting by Christian Kraemer in Berlin, Elizabeth Piper and Mark John in London and David Lawder and Patricia Zengerle in Washington; Megan Davies in New York and Chavi Mehta in Bangalore; Editing by Alexander Smith and Rosalba O'Brien)
Campaign groups such as Oxfam said that the deal would not end tax havens.
"The tax devil is in the details, including a complex web of exemptions," Oxfam tax policy lead Susana Ruiz said in a statement.
"At the last minute a colossal 10-year grace period was slapped onto the global corporate tax of 15%, and additional loopholes leave it with practically no teeth," Ruiz added.
Companies with real assets and payrolls in a country can ensure some of their income avoids the new minimum tax rate. The level of the exemption tapers over a 10-year period.
The OECD said that the deal would next go to the Group of 20 economic powers to formally endorse at a finance ministers' meeting in Washington on Oct. 13 and then on to a G20 leaders summit at the end of the month in Rome for final approval.
Countries that back the deal are supposed to bring it onto their law books next year so that it can take effect from 2023, which many officials have said is extremely tight.
French Finance Minister Bruno Le Maire said Paris would use its European Union presidency during the first half of 2022 to translate the agreement into law across the 27-nation bloc.
(Reporting by Leigh Thomas; Additional reporting by Christian Kraemer in Berlin, Elizabeth Piper and Mark John in London and David Lawder and Patricia Zengerle in Washington; Megan Davies in New York and Chavi Mehta in Bangalore; Editing by Alexander Smith and Rosalba O'Brien)
More than 130 countries reach deal on corporate minimum tax
In this June 7, 2017 file photo, the Organisation for Economic Co-operation and Development (OECD) headquarters is pictured in Paris, France. Nearly 140 countries have agreed on a tentative deal that would make sweeping changes to how big, multinational companies are taxed in order to deter them from stashing their profits in offshore tax havens where they pay little or no tax. The agreement announced Friday foresees countries enacting a global minimum corporate tax of 15% on the biggest, internationally active companies. (AP Photo/Francois Mori, File)
FRANKFURT, Germany (AP) — More than 130 countries have agreed on sweeping changes to how big global companies are taxed, including a 15% minimum corporate rate designed to deter multinationals from stashing profits in low-tax countries.
The deal announced Friday is an attempt to address the ways globalization and digitalization have changed the world economy. It would allow countries to tax some of the earnings of companies located elsewhere that make money through online retailing, web advertising and other activities.
U.S. President Joe Biden has been one of the driving forces behind the agreement as governments around the world seek to boost revenue following the COVID-19 pandemic.
The agreement among 136 countries representing 90% of the global economy was announced by the Paris-based Organization for Cooperation and Economic Development, which hosted the talks that led to it. The OECD said that the minimum tax would reap some $150 billion for governments.
“Today’s agreement represents a once-in-a-generation accomplishment for economic diplomacy,” U.S. Treasury Secretary Janet Yellen said in a statement. She said it would end a “race to the bottom” in which countries outbid each other with lower tax rates.
“Rather than competing on our ability to offer low corporate rates,” she said, “America will now compete on the skills of our workers and our capacity to innovate, which is a race we can win.”
The deal faces several hurdles before it can take effect. U.S. approval of related tax legislation proposed by Biden will be key, especially since the U.S. is home to many of the biggest multinational companies. A rejection by Congress would cast uncertainty over the entire project.
The big U.S. tech companies like Google and Amazon have supported the OECD negotiations. One reason is that countries would agree to withdraw individual digital services taxes they have imposed on them in return for the right to tax a part of their earnings under the global scheme.
That means the companies would deal with just the one international tax regime, not a multitude of different ones depending on the country.
“This accord opens the way to a true tax revolution for the 21st century,” said French Finance Minister Bruno Le Maire. “Finally the digital giants will pay their just share in taxes in the countries — including France — where they produce.”
On Thursday, Ireland announced that it would join the agreement, ditching a low-tax policy that has led companies like Google and Facebook to base their European operations there.
Although the Irish agreement was a step forward for the deal, developing countries have raised objections and Nigeria, Kenya, Pakistan and Sri Lanka have indicated they will not sign up.
Anti-poverty and tax fairness advocates have said the bulk of new revenue would go to wealthier 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 bigger share of revenue from reallocated profits, the deal would be “sub-optimal” and “not sustainable even in the short run.”
The deal will be taken up by the Group of 20 finance ministers next week, and then by G-20 leaders for final approval at a summit in Rome at the end of October.
Countries would sign up to a diplomatic agreement to implement the tax on companies that have no physical presence in a country but earn profits there, such as through digital services. That provision would affect around 100 global firms.
The second part of the deal, the global minimum of at least 15%, would apply to companies with more than 750 billion euros ($864 billion) in revenue and be passed into domestic law by countries according to model rules developed at the OECD. A top-up provision would mean tax avoided overseas would have to be paid at home. So long as at least the major headquarters countries implement the minimum tax, the deal would have most of its desired effect.
___
Kirka reported from London.
In this June 7, 2017 file photo, the Organisation for Economic Co-operation and Development (OECD) headquarters is pictured in Paris, France. Nearly 140 countries have agreed on a tentative deal that would make sweeping changes to how big, multinational companies are taxed in order to deter them from stashing their profits in offshore tax havens where they pay little or no tax. The agreement announced Friday foresees countries enacting a global minimum corporate tax of 15% on the biggest, internationally active companies. (AP Photo/Francois Mori, File)
FRANKFURT, Germany (AP) — More than 130 countries have agreed on sweeping changes to how big global companies are taxed, including a 15% minimum corporate rate designed to deter multinationals from stashing profits in low-tax countries.
The deal announced Friday is an attempt to address the ways globalization and digitalization have changed the world economy. It would allow countries to tax some of the earnings of companies located elsewhere that make money through online retailing, web advertising and other activities.
U.S. President Joe Biden has been one of the driving forces behind the agreement as governments around the world seek to boost revenue following the COVID-19 pandemic.
The agreement among 136 countries representing 90% of the global economy was announced by the Paris-based Organization for Cooperation and Economic Development, which hosted the talks that led to it. The OECD said that the minimum tax would reap some $150 billion for governments.
“Today’s agreement represents a once-in-a-generation accomplishment for economic diplomacy,” U.S. Treasury Secretary Janet Yellen said in a statement. She said it would end a “race to the bottom” in which countries outbid each other with lower tax rates.
“Rather than competing on our ability to offer low corporate rates,” she said, “America will now compete on the skills of our workers and our capacity to innovate, which is a race we can win.”
The deal faces several hurdles before it can take effect. U.S. approval of related tax legislation proposed by Biden will be key, especially since the U.S. is home to many of the biggest multinational companies. A rejection by Congress would cast uncertainty over the entire project.
The big U.S. tech companies like Google and Amazon have supported the OECD negotiations. One reason is that countries would agree to withdraw individual digital services taxes they have imposed on them in return for the right to tax a part of their earnings under the global scheme.
That means the companies would deal with just the one international tax regime, not a multitude of different ones depending on the country.
“This accord opens the way to a true tax revolution for the 21st century,” said French Finance Minister Bruno Le Maire. “Finally the digital giants will pay their just share in taxes in the countries — including France — where they produce.”
On Thursday, Ireland announced that it would join the agreement, ditching a low-tax policy that has led companies like Google and Facebook to base their European operations there.
Although the Irish agreement was a step forward for the deal, developing countries have raised objections and Nigeria, Kenya, Pakistan and Sri Lanka have indicated they will not sign up.
Anti-poverty and tax fairness advocates have said the bulk of new revenue would go to wealthier 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 bigger share of revenue from reallocated profits, the deal would be “sub-optimal” and “not sustainable even in the short run.”
The deal will be taken up by the Group of 20 finance ministers next week, and then by G-20 leaders for final approval at a summit in Rome at the end of October.
Countries would sign up to a diplomatic agreement to implement the tax on companies that have no physical presence in a country but earn profits there, such as through digital services. That provision would affect around 100 global firms.
The second part of the deal, the global minimum of at least 15%, would apply to companies with more than 750 billion euros ($864 billion) in revenue and be passed into domestic law by countries according to model rules developed at the OECD. A top-up provision would mean tax avoided overseas would have to be paid at home. So long as at least the major headquarters countries implement the minimum tax, the deal would have most of its desired effect.
___
Kirka reported from London.
Irish finance minister Paschal Donohoe speaks to reporters in Slovenia on September 10.
Photo by Igor Kupljenik/EPA-EFE
Oct. 8 (UPI) -- A global treaty to impose a minimum global tax rate of 15% on large multinational companies took a step closer to approval Friday when Hungary joined Ireland and Estonia in dropping opposition to the agreement.
A deal is expected to be announced Friday at a meeting overseen by the Paris-based Organization for Economic Cooperation and Development.
The treaty involves more than 130 nations and would be the most substantial overhaul to the global tax system in a century. The new tax system could begin in 2023.
Finance officials from the Group of 20 major economies announced their approval of the plan in July and the OECD has been pushing for an agreement for about a decade.
Ireland agreed to drop its opposition to the treaty after language was revised to remove a stipulation that minimum tax rates should be "at least 15%."
"We have secured the removal of 'at least' in the text," Irish Finance Minster Paschal Donohoe said, according to CNN. "This will provide the critical certainty for government and industry and will provide the long-term stability and certainty to business in the context of investment decisions."
The change allows smaller Irish companies with less than $867 million in annual revenue to continue paying a corporate tax rate of 12.5%. That reduced rate lured many companies like Facebook, Apple and Google to headquarter their European operations in Ireland.
The 15% rate would apply to more than 1,500 Ireland-based multinational companies.
Hungary, which has attracted investment with a 9% corporate tax rate, agreed to join the deal after securing an exemption that would allow multinational companies to reduce profits subject to the tax over a period of 10 years.
The deal is subject to U.S. congressional approval, where Republicans have voiced some opposition. President Joe Biden's administration is supportive of the change.
"It's a once-in-a-generation opportunity to make the international tax system fairer," U.S. Secretary of State Anthony Blinken said in a statement this week.
OECD Secretary-General Mathias Cormann said he's "quietly optimistic" that an agreement will be finalized before the G20 Leaders' Summit in Rome on Oct. 30.
Oct. 8 (UPI) -- A global treaty to impose a minimum global tax rate of 15% on large multinational companies took a step closer to approval Friday when Hungary joined Ireland and Estonia in dropping opposition to the agreement.
A deal is expected to be announced Friday at a meeting overseen by the Paris-based Organization for Economic Cooperation and Development.
The treaty involves more than 130 nations and would be the most substantial overhaul to the global tax system in a century. The new tax system could begin in 2023.
Finance officials from the Group of 20 major economies announced their approval of the plan in July and the OECD has been pushing for an agreement for about a decade.
Ireland agreed to drop its opposition to the treaty after language was revised to remove a stipulation that minimum tax rates should be "at least 15%."
"We have secured the removal of 'at least' in the text," Irish Finance Minster Paschal Donohoe said, according to CNN. "This will provide the critical certainty for government and industry and will provide the long-term stability and certainty to business in the context of investment decisions."
The change allows smaller Irish companies with less than $867 million in annual revenue to continue paying a corporate tax rate of 12.5%. That reduced rate lured many companies like Facebook, Apple and Google to headquarter their European operations in Ireland.
The 15% rate would apply to more than 1,500 Ireland-based multinational companies.
Hungary, which has attracted investment with a 9% corporate tax rate, agreed to join the deal after securing an exemption that would allow multinational companies to reduce profits subject to the tax over a period of 10 years.
The deal is subject to U.S. congressional approval, where Republicans have voiced some opposition. President Joe Biden's administration is supportive of the change.
"It's a once-in-a-generation opportunity to make the international tax system fairer," U.S. Secretary of State Anthony Blinken said in a statement this week.
OECD Secretary-General Mathias Cormann said he's "quietly optimistic" that an agreement will be finalized before the G20 Leaders' Summit in Rome on Oct. 30.
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