130 countries agree to global corporate tax rate

LONDON: Efforts to force multinational companies to pay a fairer share of tax have taken a decisive step forward after 130 countries and jurisdictions agreed to plans for a global minimum corporate tax rate.

In a landmark moment for the world economy, the Organisation for Economic Co-operation and Development (OECD) issued a statement committing each of the countries to a two-pillar plan to radically reshape the global tax system.

Building on an agreement between the G7 in London last month, the latest breakthrough brings together all of the nations in the G20 group of the world’s biggest economies, including China, India, Brazil and Russia.

Some countries, however, including Ireland, Hungary and Estonia, have yet to sign up to the reforms, which are being negotiated with 139 participants in talks organised by the Paris-based OECD. The others not to have signed at this stage are Barbados, Kenya, Nigeria, Sri Lanka and St Vincent & the Grenadines. Peru abstained because it currently does not have a government.

Several jurisdictions with low or zero corporation tax rates commonly regarded as tax havens – including the Cayman Islands and Gibraltar – were among signatories to the deal. Sources close to the process said it was clear to these places that the “writing was on the wall”.

The principle of the agreement is that multinationals would be forced to pay a minimum of 15% tax in each country they operate in.