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Rabat – 136 countries, representing more than 90% of global GDP, have signed a historic deal, announced on Friday, to ensure minimum corporate taxes for companies.
The new deal sees to it that a minimum corporate tax of 15% would be imposed on companies, making it harder for big firms such as Amazon or Google to transfer their wealth abroad in order to avoid paying.
Talks leading up to the agreement were hosted by the Organisation for Economic Co-operation and Development (OECD) in Paris.
The deal includes countries that have historically adopted low tax-rate policies, such as Ireland, where companies like Facebook and Google had based their European headquarters.
Critics of the agreement say that 15% is still too low of a mandatory tax, and that big companies will still inevitably find ways to avoid paying taxes.
Alongside the minimum tax, the agreement also allows countries to tax revenue from ventures like online services and sales, which do not necessarily require a physical presence or headquarters.
This comes months after a similar deal was reached between the G7 nations in a summit earlier this year, which also called for the implementation of a “global tax rate” of 15%.
Other criticisms of the deal came from developing countries, where most governments are heavily dependent on corporate taxes as a source of income. For these critical voices from the Global South, the deal is simply unsustainable for developing countries unless a portion of the tax revenues is shared with them.
On the other hand, several officials involved with the agreement have praised it, with US Treasury Secretary Janet Yellen stating that it “represents a once-in-a-generation accomplishment for economic diplomacy.”
UK Chancellor Rishi Sunak also spoke positively about the deal, saying that it would “upgrade the global tax system for the modern age.”
The agreement still has some hurdles and processes that it has to go through to see the light of day. These include being passed by a group of 20 leaders later this year, and being signed as part of diplomatic agreements by the concerned countries.
Most importantly, the US Congress will need to approve tax propositions by President Biden in order for the deal to go through, as a rejection by Congress could cast doubt over the viability of the entire project.
