Most of the countries negotiating a global overhaul of cross-border taxation of multinationals have backed plans for new rules on where companies are taxed and a tax rate of at least 15%, they said on Thursday after two days of talks.
“A detailed implementation plan together with remaining issues will be finalized by October 2021,” read a statement signed by 130 out of 139 countries and jurisdictions involved in the negotiations.
The Paris-based Organization for Economic Cooperation and Development, which hosted the talks, said a global minimum corporate income tax of at least 15% could yield around $150 billion in additional global tax revenues annually.
It added that new rules on where the biggest multinationals are taxed would see taxing rights on more than $100 billion of profits shifted to countries where the profits are earned.
The agreement will to G20 finance ministers for endorsement at a meeting in Venice next week.
German Finance Minister Olaf Scholz on Thursday said the agreement by 130 countries backing a global corporate minimum tax marked the biggest breakthrough in global taxation in decades.
“The race to the bottom in competition is over,” Scholz told reporters during a visit to Washington shortly after the agreement was reached in talks led by the Organization for Economic Cooperation and Development.
He said details still needed to be worked out, but the agreement marked “colossal progress” and would allow countries to increase investment in infrastructure and efforts to combat climate change.
Scholz said the 130 countries represented 90% of global gross domestic output and reflected huge efforts by Germany and other countries to ensure fair taxation of big technology corporations like Amazon.
He said the goal was to ensure that finance officials from the Group of 20 major economies endorse the plan when they meet in Venice July 9-10, following a similar move by the Group of Seven advanced economies in London last month.
“This is the biggest progress in international taxation we have had since 10, 20, 30 years,” he said. “It’s a really big breakthrough, and it will change everything.”
Scholz said the agreement would help countries ensure they have more funding to pay for “important priorities” such as infrastructure, climate change and social spending needs.
Ireland on Thursday was one of the 9 countries to decline to to sign a statement agreeing to global overhaul of cross-border taxation of multinationals.
The office of Irish Finance Minister Paschal Donohoe, who is negotiating on behalf of Ireland at the Paris-based Organization for Economic Cooperation and Development, did not respond to a request for comment.
The source said Ireland at the meeting expressed broad agreement with the statement but reservation around setting a rate of at least 15%.
With a rate of 12.5% that has helped attract some of the biggest multinationals to the country, Ireland has more to lose than most from the overhaul.
Donohoe, who is also president of euro zone’s grouping of finance ministers, has repeatedly said he wants any deal to allow small countries like Ireland to be able to use tax competition as a lever to compensate for the natural advantages enjoyed by larger countries in attracting jobs and large investments.
Critics say low-tax countries like Ireland and Luxembourg enjoy a disproportionate amount of multinational investment, with multinationals employing one in eight Irish workers.
Donohoe has also said he anticipated any final deal would allow companies to offset part of their tax bills through research and development, an important aspect for Ireland.