Global corporate tax deal wins agreement

PARIS: A group of 136 countries on Friday set a minimum global tax rate of 15% for big companies and sought to make it harder for them to avoid taxation in a landmark deal that US President Joe Biden said levelled the playing field.

The deal aims to end a fourdecade-long “race to the bottom” by setting a floor for countries that have sought to attract investment and jobs by taxing multinational companies lightly, effectively allowing them to shop around for low tax rates.

Negotiations have been going on for four years and while the costs of the coronavirus pandemic gave them additional impetus in recent months, a deal was only agreed when Ireland, Estonia and Hungary dropped their opposition and signed up.

Moreover the 15% floor agreed is well below a corporate tax rate which averages around 23.5% in industrialised countries.

“Establishing, for the first time in history, a strong global minimum tax will finally even the playing field for American workers and taxpayers, along with the rest of the world,” Biden said in a statement.

The deal aims to stop large firms booking profits in low-tax countries such as Ireland regardless of where their clients are, an issue that has become ever more pressing with the growth of “Big Tech” giants that can easily do business across borders. Out of the 140 countries involved, 136 supported the deal, with Kenya, Nigeria, Pakistan and Sri Lanka abstaining for now. The Parisbased Organisation for Economic Cooperation and Development, has been leading the talks, said the deal would cover 90% of global economy.