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Global Tax Reforms Comes a Step Closer as Backed by 130 Countries

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  • Sep 08, 2021

A total of 130 countries have mutually agreed on a global agreement of tax reform, ensuring that multinationals have to pay their fair share wherever they are operating. Some E.U. states refused to sign up. Once the deal is implemented, many global companies, including tech giants such as Google, Amazon, Facebook, and Apple, would be taxed at a fair rate of at least 15 percent, the Organization for Economic Co-operation and Development (OECD) said in a statement. The new tax regime will be beneficial to the services and goods, and it will also help to grow financial services and business very rapidly. This will add around USD 150 billion to government coffers globally once it becomes operative. According to the OECD, it hoped that it would be implemented by 2023. The new framework updates many key elements of the century-old international tax system which is considered no longer fit for the modern digital economy.

The formal deal follows the approval of the G-7 group of wealthy nations last month, and negotiations will now move to a meeting of the G-20 group of developed and emerging countries on July 9-10 in Venice, Italy. The U.S. president Joe Biden said that the latest deal takes the U.S. amazingly at a striking distance from a comprehensive global deal to stop the race to the bottom in corporate taxes. Germany, who is another promoter of the tax reform, praised it as a "colossal step towards tax justice," while France called it the most important tax deal in the century.

U.K. finance minister Rishi Sunak, whose country holds the G7 presidency, said, "The fact that 130 countries from around the world, including all of the G20, are now on board is another step in our reform mission global taxes in everyone's interest. But the low-taxed EU countries Ireland and Hungary refused to sign the agreement reached under the OECD, the organization said, pointing to persistent divisions in global taxation. Both countries are part of a group of EU countries, including Luxembourg and Poland, which have relied on low tax rates to attract multinational companies and build their economies. Ireland, the E.U. home of tech giants Facebook, Google, and Apple, has a corporate tax rate of only 12.5 percent. Irish Treasury Secretary Paschal Donohoe warned that Ireland could lose 20 percent of its corporate income as a result of the new rules.