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130 nations agree to global corporate tax reform

The Organization for Economic Cooperation and Development (OECD) announced on Thursday that 130 nations have agreed to a plan to reform taxation rules regarding multinational corporations.

The plan involves two pillars. The first pillar would reallocate some taxing rights over multinational enterprises (MNEs) from their home countries to regions where they operate and earn profits regardless of whether the MNEs have a physical presence in those regions. The second pillar would introduce a minimum global corporate tax rate of 15 percent. Pillar one is expected to reallocate taxing rights over some $100 billion in MNE 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 MNEs. 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 Mathias Cormann 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 Paschal Donohoe 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 “remain[s] 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.

Article: 130 nations agree to global corporate tax reform

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