136 Countries Agree on a Global Minimum Corporate Tax
At the recently concluded G20 summit in Rome, leaders recognized the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) developed by the Organisation for Economic Co-operation and Development (OECD), a press release said. The Framework agreed upon by 136 countries was agreed upon on October 8, 2021, and sets a rate of 15 percent as a minimum applicable corporate tax across these countries.
Jeff Bezos' Amazon is quite the poster child of a mega organization not paying its share of dues to the U.S. government. However, Amazon, Apple, Microsoft, Facebook (now Meta), Alphabet, and Netflix are some of the other tech players that avoid federal taxes by conducting parts or the majority of their operations overseas. According to a The Guardian report, tech companies paid as little as one percent tax in Ireland, even though its official tax rate of 12.5 percent was much lower than the U.S.
The Donald Trump-led U.S. government had already changed taxation laws in the country which led to Amazon paying federal taxes for the first time in over four years, CNBC had reported last year.
The BEPS agreement, however, is set to increase tax revenues globally since the new agreement would allow countries to tax companies where their services are sold, rather than where their operations are conducted, The New York Times reported.
While an agreement is now in place, given differences in taxation laws implementing it across the varied landscape of 136 countries is the challenge. According to the press release, leaders at the G20 summit had called on the OECD to frame rules and multilateral instruments so that the agreement could come into effect by 2023.
In its report, Washington Post said that the agreement applies to companies with revenues upwards of €750 million (US$ 870 million) and therefore would only be applicable to some of the largest corporations around the world. After the Trump-led U.S. government changed taxation rules, reports suggest that companies began parking their profits overseas, instead of bringing them to the U.S.
When the new agreement comes into force, even if companies move their profits to a country that has lower taxes, they will have to pay a top-up tax where they are headquartered to attain the 15 percent tax mark. The move is expected to raise $150 billion in global tax revenues and $350 billion in additional tax in the U.S. over the next ten years, The New York Times reported.