Global corporate tax reform and consent of 130 nations
130 nations have consented to a plan to reform taxation rules regarding multinational corporations.
The Organization for Economic Cooperation and Development (OECD) declared 130 nations have endorsed a plan to reform taxation regulations concerning multinational corporations.
The plan includes two pillars. The first pillar would re-allocate certain taxing rights over multinational enterprises from their home countries to regions where they operate and earn profits irrespective of whether the multinational enterprises have a physical presence in those regions.
The second pillar would submit a minimum global corporate tax rate of 15 percent. Pillar one is expected to re-allocate taxing rights over some $100 billion in multinational enterprises profits, while pillar two is expected to generate $150 billion in global annual tax revenue.
The OECD plan follows from an agreement made by the G7 countries last month to establish a global tax rate on multinational enterprises. The OECD plan has an October 2021 deadline for finalizing the technical parts of the two-pillar plan, with the implementation of the plan to be achieved by 2023. OECD Secretary-General said that the two-pillar plan “will ensure that large multinational companies pay their fair share of tax everywhere.”
However, several smaller nations, most notably Ireland, have not signed on to the agreement. Ireland currently has a low corporate tax rate of 12.5 percent, and its finance minister released a statement that broadly supported the two pillar plan, but included reservations regarding the 15 percent minimum tax. Nonetheless, Minister Donohoe said that Ireland “remains committed to the process.” Other nations that have refused the deal include Barbados, Saint Vincent, the Grenadines, Hungary, Estonia, Kenya, Nigeria, Peru, and Sri Lanka.