Global tax reforms target multinationals

The OECD said that major companies would pay taxes of at least 15% once the deal is ratified

The push for a uniform corporate tax policy across the world has received a boost as 130 countries and jurisdictions agreed to the proposals.

The Organisation for Economic Co-operation and Development (OECD) said that major companies, including Google and Amazon, would pay taxes of at least 15% once the deal is ratified.

Apart from increasing the minimum tax level for multinationals, the deal aims to shift taxation rights from the country a firm is headquartered to the markets where they make profits.

Tech giants like Facebook and Amazon have been criticised for years for paying low corporation tax in countries where they operate.

All countries within the G20 group came to an agreement at the G7 in London in June.

The signing countries represent more than 90% of the world’s gross domestic product (GDP).

But some low-tax countries such as Ireland, Hungary and Estonia are yet to sign up to the tax reforms.

The framework updates key elements of the century-old international tax system, which is no longer fit for purpose in a globalised and digitalised 21st-century economy, the OECD said.

President Joe Biden said the deal brings the world towards an agreed upon policy that will halt the race to the bottom for corporate taxes.

The deal also includes a number of countries and jurisdictions known as tax havens.

After the agreement comes into effect, major companies would be required to pay a minimum of 15% tax in every country they operate in.

Mathias Cormann, Secretary General of the OECD, added that after years of intense work and negotiations, this historic package will ensure that large multinational companies pay their fair share of tax everywhere.

In the UK, Chancellor Rishi Sunak is pushing for exemption for the City of London in the G7’s move for a new global tax system targeted at the world’s largest multinational enterprises.

Sunak previously stated that the recent agreement was historic however it would force the biggest tech companies to pay their fair share of tax in the UK.

However, the Financial Times reported that Britain is one of a number of countries seeking an exemption on financial services, as the chancellor is concerned that the tax reforms could impact multinational banks headquartered in London.