Us Treasury Secretary Yellen (Janet Yellen) announced on Thursday that 130 countries had agreed to impose a minimum tax rate on global companies, accounting for 90 per cent of the world's GDP and the vast majority of the 139 participating countries. This is part of a broader agreement to reform international tax rules. The Organization for Economic Cooperation and Development ((Organization for Economic Cooperation and Development,) also said that the remaining elements of the follow-up tax reform framework and the implementation plan would be completed in October this year.
If the global minimum corporate tax rate is widely implemented, it will effectively put an end to the practice of multinationals relocating their headquarters to low-tax jurisdictions such as Ireland and the British Virgin Islands, even though their clients, businesses and executives are elsewhere.
"for decades, the United States has participated in a counterproductive international tax competition, lowering our corporate tax rates while watching other countries lower their tax rates accordingly. The result of this competition is "bottom-to-bottom competition" around the world: who can lower corporate interest rates further and faster? No country has ever won this competition. " Yellen said in a statement about the agreement.
"Today, the agreement reached by 130 countries that account for more than 90 per cent of global GDP is a clear signal that 'bottom-to-bottom competition' is one step closer to the end," Ms Yellen said.
The agreement also reportedly includes a framework for abolishing the digital services tax, which is aimed at the largest technology companies in the United States.
The OECD has laid most of the groundwork for the adoption of the world's lowest tax rates. Last autumn, the OECD released a blueprint outlining the two pillars of international taxation. Pillar one of the planned tax reform will require large multinationals to pay taxes to areas where they actually make profits, regardless of whether they own entities in the region or not, and OECD's statement specifically mentions large Internet companies. Pillar two is the establishment of a global minimum corporate tax to ensure that countries do not broaden their tax base through "low-tax competition".
Ms Yellen's statement did not specify the actual setting of the world's minimum tax rate, but the Biden administration has been pushing for a tax rate of at least 15 per cent.
Us President Joe Biden says he looks forward to continuing negotiations on the world's minimum corporate tax and reaching a comprehensive agreement in the autumn statement.
Ireland is one of 130 of the 139 countries that have signed agreements to support the reform of global corporate tax rates and nine have not signed tax declarations.
Finance ministers of the G-20 andThe central bank governor is scheduled to meet later this month in Venice, Italy, and the international tax plan is expected to be the main topic of the meeting.