Thursday, 21 October, 2021
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Global tax deal seeks to end havens

Global tax deal seeks to end havens

Popular News

PARIS: A group of 136 countries on Friday set a minimum global tax rate of 15 per cent for big companies and sought to make it harder for them to avoid taxation in a landmark deal that US President Joe Biden said levelled the playing field.

The deal aims to end a four-decade-long “race to the bottom” by setting a floor for countries that have sought to attract investment and jobs by taxing multinational companies lightly, effectively allowing them to shop around for low tax rates, report agencies.

The 15 per cent floor agreed to is, however, well below a corporate tax rate which averages around 23.5 per cent in industrialised countries.

Some developing countries that had wanted a higher rate said their interests had been sidelined to accommodate richer nations, while NGOs criticised the deal’s many exemptions, with Oxfam saying it effectively had “no teeth”.

The accord also promises to be a tough sell in Washington, where a group of Republican US senators sent a letter to Treasury Secretary Janet Yellen saying they had serious concerns.

Negotiations have been going on for four years, with the deal finally agreed when Ireland, Estonia and Hungary dropped their opposition and signed up.

The deal aims to stop large firms booking profits in low-tax countries such as Ireland regardless of where their clients are, an issue that has become ever more pressing with the growth of “Big Tech” giants that can easily do business across borders.

“Establishing, for the first time in history, a strong global minimum tax will finally even the playing field for American workers and taxpayers, along with the rest of the world,” Biden said in a statement.

Out of the 140 countries involved, 136 supported the deal, with Kenya, Nigeria, Pakistan and Sri Lanka abstaining for now.

The Paris-based Organisation for Economic Cooperation and Development (OECD), which has been leading the talks, said that the deal would cover 90 per cent of the global economy. “We have taken another important step towards more tax justice,” German Finance Minister Olaf Scholz said in a statement emailed to Reuters.

“We now have a clear path to a fairer tax system, where large global players pay their fair share wherever they do business,” his British counterpart Rishi Sunak said.

But with the ink barely dry, some countries were already raising concerns about implementing the deal. The Swiss finance ministry demanded that the interests of small economies be taken into account and said that the 2023 implementation date was impossible.

In the United States, meanwhile, Republican senators said they were concerned the Biden administration was considering circumventing the need to obtain the Senate’s authority to implement treaties.

Under the Constitution, the Senate must ratify any treaty with a two-thirds majority, or 67 votes. Biden’s fellow Democrats control only 50 seats in the 100-member chamber. And Republicans in recent years have been overwhelmingly hostile to treaties and have backed cuts in corporate taxes.