[ad_1]
A major reform of the international tax system finalised last week at the Organisation for Economic Cooperation and Development (OECD) will ensure that multinational enterprises (MNEs) will be subject to a minimum 15 per cent tax from 2023. The deal will also reallocate more than $125 billion of profits from around 100 of the world’s largest and most profitable MNEs to countries worldwide.
This will ensure that these firms pay a fair share of tax wherever they operate and generate profits. The deal was agreed to by 136 countries and jurisdictions representing more than 90 per cent of global gross domestic product (GDP), an OECD press release said.
Following years of intensive negotiations to bring the international tax system into the 21st century, 136 jurisdictions (out of the 140 members of the OECD/G20 Inclusive Framework on BEPS) joined the statement on the Two-Pillar Solution to address the tax challenges arising from the digitalisation of the economy.
A major reform of the international tax system finalised last week at the Organisation for Economic Cooperation and Development will ensure that multinational enterprises (MNEs) are subject to a minimum 15 per cent tax from 2023. The deal will also reallocate more than $125 billion of profits from around 100 of the world’s most profitable MNEs to countries.
With Estonia, Hungary and Ireland having joined the agreement. Four countries—Kenya, Nigeria, Pakistan and Sri Lanka—have not yet joined.
The two-pillar solution will be delivered to the G20 Finance Ministers meeting in Washington D.C. on October 13, and then to the G20 Leaders Summit in Rome at the end of the month.
The global minimum tax agreement does not seek to eliminate tax competition, but puts multilaterally agreed limitations on it, and will see countries collect around $150 billion in new revenues annually.
Pillar One will ensure a fairer distribution of profits and taxing rights among countries with respect to the largest and most profitable multinational enterprises. It will 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.
Specifically, multinational enterprises with global sales above €20 billion and profitability above 10 per cent will be covered by the new rules, with 25 per cent of profit above the 10 per cent threshold to be reallocated to market jurisdictions.
Under Pillar One, taxing rights on more than $125 billion of profit are expected to be reallocated to market jurisdictions each year. Developing country revenue gains are expected to be greater than those in more advanced economies, as a proportion of existing revenues, OECD said.
Pillar Two introduces a global minimum corporate tax rate set at 15 per cent. The new minimum tax rate will apply to companies with revenue above €750 million and is estimated to generate around $150 billion in additional global tax revenues annually.
Further benefits will also arise from the stabilisation of the international tax system and the increased tax certainty for taxpayers and tax administrations, OECD added.
Fibre2Fashion News Desk (DS)
[ad_2]
Source link
