OECD Receives Backing For Historic International Tax Overhaul
Ulrika Lomas, Tax-News.com, Brussels
06 August, 2021
The OECD has said 131 countries and jurisdictions have put their name to an international agreement on an overhaul to tax rules for the digitalized economy and for large multinational businesses.
A handful of territories from the 139-member Inclusive Framework have not yet joined the Statement, the OECD acknowledged.
The OECD said the remaining elements of the framework, including an implementation plan, will be finalized in October, with implementation eyed for 2023.
The eight territories that have decided to not include their name in the statement are:
- Saint Vincent and the Grenadines; and
- Sri Lanka.
The OECD said its two-pillar plan seeks to ensure that large multinational enterprises (MNEs) pay tax where they operate and earn profits. It said: "Pillar One will ensure a fairer distribution of profits and taxing rights among countries with respect to the largest MNEs, including digital companies. It would re-allocate some taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there." Meanwhile, "Pillar Two seeks to put a floor on competition over corporate income tax, through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases."
The OECD has said that pillar one will newly entitle market jurisdictions to taxing rights on more than USD100bn of profits earned by digital multinationals. Meanwhile, it said the countries had agreed to establish a minimum rate of at least 15 percent on multinational companies. This minimum corporate tax burden will generate about USD150bn annually, it said. "Additional benefits will also arise from the stabilization of the international tax system and increased tax certainty for taxpayers and tax administrations," it added.
OECD Secretary-General Mathias Cormann said: "After years of intense work and negotiations, this historic package will ensure that large multinational companies pay their fair share of tax everywhere. This package does not eliminate tax competition, as it should not, but it does set multilaterally agreed limitations on it. It also accommodates the various interests across the negotiating table, including those of small economies and developing jurisdictions. It is in everyone's interest that we reach a final agreement among all Inclusive Framework Members as scheduled later this year."
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