Global deal on 15% minimum tax rate for multinationals edges closer

Almost 140 countries understood to be in final OECD talks on measures to stop firms moving profits to tax havens

Almost 140 countries are edging closer to a global deal on the taxation of multinationals, with agreement on a minimum 15% rate of corporation tax set to be announced as part of a landmark statement at the OECD in Paris on Friday.

Governments representing more than 90% of the world economy are understood to be in the final stages of talks on a global minimum rate and other measures designed to stop multinationals shifting profits into tax havens.

It is understood the accord will update several key details from an outline statement signed by 130 countries in July. Sources indicated a 15% rate was likely to be settled upon as part of the OECD’s Inclusive Framework tax negotiating forum, in a move backing down from an earlier agreement for a minimum of “at least 15%”.

In a sprint to agree further details after almost a decade of negotiations, the push to issue a statement comes before a key meeting between G20 finance ministers taking place in Washington next week.

Ireland, one of nine countries that declined to sign the OECD headline agreement in July, is expected to sign the landmark deal on Friday.

The French economy minister, Bruno Le Maire told journalists in Brussels on Tuesday that Ireland was “in the process of evolving” its position.

Earlier this week the Irish finance minister, Paschal Donohoe, said there had been “some progress” on the matter after a meeting of finance ministers in Luxembourg, with a final text expected to go to the Irish cabinet on Thursday.

Le Maire said: “I welcome the evolution of the Irish position, in particular on Pillar 2”, a reference to the 15% floor the OECD is seeking to put on global corporate tax.

“We see that Ireland is in the process of evolving on this subject and that a compromise can emerge around 15% as the effective rate,” he said. “Contrary to popular belief, [the headline rate] is no longer the most important sticking point,” he added.

The 12.5% tax rate has been the cornerstone of Ireland’s foreign inward investment policy for decades and has helped lure a vast array of multinationals in the tech and pharma sectors to establish their European and Middle Eastern headquarters in the country.

But experts have long pointed out that the more controversial aspect of Irish tax policy was in fact the tax avoidance scheme, dubbed the “double Irish”, which was outlawed in 2015.

Pressure is mounting on governments around the world to take tougher action on tax, following revelations in the Pandora papers exposing vast amounts of hidden offshore wealth.

Tax experts said the statement from the OECD on Friday was poised to commit signatories to implementing the two-pillar global tax reforms by 2023, and would include details for a new multilateral tax instrument – a type of legal mechanism required to overhaul the global tax system.

The twin-pronged reforms would create a new taxing right, enabling nations to levy a slice of the profits generated by some of the world’s biggest firms, based on the sales they make within each country’s borders. The second “pillar” would also set a global minimum tax rate of 15% on large companies.

Several other countries have voiced other concerns over the accord, including China, India, Argentina and other members of a powerful group of 24 developing countries.

Most of the so-called G-24 had signed up to the OECD’s July accord, but the group is calling for a greater share of multinational profits to be taxed in the countries where revenues are generated. They have warned that limited reforms would be “sub-optimal” and would “not be sustainable even in the medium run”.

Critics are concerned the deal would benefit the US most because it has the largest number of multinationals on its shores on which to levy a global minimum tax, while the second pillar allowing governments to raise money from large firms operating within their borders is thought to be too limited in scope. It emerged earlier this summer that Amazon could end up paying less tax in the UK under the reforms, which are expected to target as few as 100 major global firms and include exemptions for banks and natural resources companies.

“There is a real danger that if the deal on table is not improved (which disproportionately favours the world’s richest countries), then the entire deal will unravel, and the world will miss out on this once-in-a-generation opportunity to tackle the scourge of tax dodging and to level up,” the campaigners wrote.

Contributors

Richard Partington and Lisa O'Carroll

The GuardianTramp

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