Many of the world’s most powerful nations came together on Friday with the intention of ending tax havens. They agreed to push for a global minimum tax rate of 15%.
The changes they are calling for
The New York Times reported that the Organization for Economic Co-operation and Development conducted the negotiations on Friday. The organization said the new minimum tax rate would apply to companies with annual revenue above 750 million euros or $ 866 million. With that, it could generate around $ 150 billion in additional global tax revenue every year.
The New York Times quoted Mathias Cormann, the organization’s general secretary, as saying: “Today’s agreement will make our international tax system fairer and more efficient. We must now work quickly and diligently to ensure the effective implementation of this major reform. The other countries that initially agreed to the plan are Hungary, Ireland and Estonia. In contrast, Kenya, Nigeria, Pakistan and Sri Lanka did not sign the agreement.
Besides raising the tax rate to 15%, the deal also aims to create new rules for digital businesses. According to the New York Times, the deal will force tech giants like Amazon and Facebook to pay taxes in countries where their goods or services are sold even if they do not have a physical presence in that country.
Further details of the agreement are still being worked on. The deal could be finalized in Washington by finance ministers from the Group of 20 largest economies next week. Once the deal is finalized, national leaders will sign it when they meet for a summit in Rome by the end of this month.
Biden’s hand on the proposal
The new deal reached by many countries was revived after US President Joe Biden took office and expressed his intention to renew the country’s commitment to multilateralism. The Biden administration is also currently working to increase corporate tax rates in the country, and the establishment of the global minimum tax rate will be a key factor in preventing companies from escaping the increase in the United States. United by moving their headquarters to another country.
Republicans are prepared to oppose the changes Biden wants to impose on the national tax agenda. They also immediately opposed the global deal and threatened to block it at the congressional level. Democrats, on the other hand, expect they can push the overall tax hike through a legislative process called budget reconciliation.