Facebook Inc has 130 countries and jurisdictions. And Alphabet Inc. With the rules for sharing plunder from multinational companies such as Google, as well as approving the setting of minimum tax rates for companies, the world has taken a major step towards a drastic change in global taxation.
After years of failure and setbacks, the deal mediated by negotiations at the Organization for Economic Co-operation and Development prepares a group of 20 finance ministers to, in principle, approve the agreement at a meeting in Venice next week. I will arrange it.
This could mean that rules will come into force in 2023 to reduce tax avoidance by forcing multinationals to pay an effective tax rate of “at least 15%” and increasing tax revenues from foreign companies in smaller countries. There is.
The tax will apply to approximately 100 multinationals, including digital giants. Treasury officials said the number of affected Japanese companies would be “limited.”
The Paris-based OECD said in a statement Thursday that a “small group” of the country “has not yet participated” in the plan. This includes Hungary and Ireland, which attracts some of the world’s largest companies with low taxes.
According to the OECD, some of the major countries that were question marks agreed to the terms, including India, China and Turkey. Technical details may leave room for further concessions to the developing economy.
Another Thursday’s broad agreement may have proved deadly to efforts to reshape tax law, given the short chances of getting a global deal approved by the U.S. Congress and other parliaments. Avoid stumbling.
US Treasury Secretary Janet Yellen praised the news, calling it “a historic day of economic diplomacy.”
Yellen said in a statement Thursday that the international “race to the bottom” of corporate tax rates, which robbed the country of the income needed for infrastructure, education and other needs, was nearing its end.
“In the United States, this agreement guarantees that businesses will bear a significant portion of that burden,” she said. “We now have the opportunity to build global and domestic tax systems that allow American workers and businesses to compete and win in the global economy.”
Ireland and Hungary did not participate in the agreement, which could cause problems for the European Union to implement the plan. Ireland’s Treasury Minister Paschal Donohoe said last month that trading at the lowest interest rates must meet the needs of “big and small countries in developed and developing countries.”
France’s Treasury Minister Bruno Le Maire spends next week before the G20 meeting convincing European countries to “make the necessary efforts to join a historic agreement that brings together the states of the planet very broadly.” He said he would double his efforts.
Resolving this issue has become increasingly urgent for the global economy after disagreements over taxation and minimum tax rates on tech companies were caught up in trade conflicts last year. The promise of nearly $ 150 billion in additional income to the government, as most countries face huge budget shortages in the wake of the Covid-19 pandemic, also helped reach an agreement.
The challenge facing trading proponents is to force developing countries to apply for wholesale to what was first mediated by the Group of Seven. Small clubs with affluent economies, including the United States, United Kingdom and France, agreed in London last month on a rough outline of the two pillars of the OECD negotiations: a mechanism to share the right to tax “at least 20%” of the above profits. 10% margin for the largest multinational companies. Minimum corporate tax of at least 15%.
As it stands, the OECD document released Thursday made some changes to these proposals, and the amount of redistributed profits must be between 20% and 30% of residual profits above the 10% margin. It has to say that it has the potential to increase the profits of small economies.
It also states that companies with revenues in excess of € 20 billion ($ 24 billion) will be subject to the new rules on taxable locations. In concessions to economies of scale, the Comprehensive Framework agreed to review the terms seven years later and lower the threshold to € 10 billion.
According to OECD conditions, even the smallest economies will benefit from lower thresholds to allow multinational corporations to be taxed.
According to Le Maire, the deal solves another problem by ensuring that Amazon.com Inc. is taxed in its local jurisdiction, even if it has a rate of return of less than 10%. To do. In short, the more profitable cloud services businesses of online retailers are subject to a new rule that the OECD calls “segmentation,” which is “exceptional” when a company unit meets revenue and profit thresholds. May apply in “Situations”.
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