More than 130 countries agree to set a minimum corporate tax rate: NPR
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More than 130 countries on Friday endorsed a landmark agreement to set a new minimum tax rate for companies around the world.
The agreement, brokered by the Organization for Economic Co-operation and Development (OECD), will set a minimum tax rate of 15% from 2023, and has the potential to transform the global business landscape by cracking down on tax havens.
But the agreement still faces a tough road given that it must be passed by the closely divided US Congress and approved by every country.
However, the deal is a big win for Treasury Secretary Janet Yellen, who spearheaded the proposal, arguing that it would end the practice of companies shopping around the world for countries with lower tax jurisdictions.
“Today’s agreement represents a once-in-a-generation feat of economic diplomacy,” Yellen said in a statement.
For months, the Biden administration has lobbied for change, whose OECD projects could raise $150 billion in revenue each year.
US companies have come under scrutiny for paying little, or sometimes no, taxes by stationing themselves in countries with low tax regimes, such as Ireland.
The agreement also calls for tech companies like Amazon and Facebook to be taxed in the countries where they sell their goods or services, regardless of whether they are physically located there.
The global tax deal still faces a bumpy road
Forcing companies around the world to pay at least 15% of corporate tax could generate much-needed revenue at a time when the Biden administration is looking to spend trillions of dollars on a slew of initiatives, including strengthening safety nets and investing in infrastructure infrastructure.
This would allow the Biden administration to push for higher corporate taxes by reducing incentives for companies to establish themselves outside the United States.
However, Congress will need to approve the deal – an uncertain prospect at a time when lawmakers are deeply divided over Biden’s domestic agenda.
This week, the Senate reached a deal to raise the debt ceiling, but only until early December. Republicans led by Senator Mitch McConnell, R-Kentucky, have halted previous attempts by Democrats to raise or suspend the debt ceiling, raising fears the US is running out of money to pay its bills.
The tax agreement will now be tabled for approval at the G20 leaders meeting in Rome at the end of the month.