MNEs Subject to 15 Percent Tax Rate in 2023By Emilio Aristegui | Tue, 10/12/2021 - 09:01
The digital age is set for a ground-breaking tax deal that will benefit multinational enterprises (MNEs) by receiving a 15 percent tax rate in 2023 assured the Organization for Economic Co-operation and Development (OECD).
The OECD declared through a press release, that “The landmark deal, agreed by 136 countries and jurisdictions representing more than 90 percent of global GDP, will also reallocate more than US$125 billion of profits from around 100 of the world’s largest and most profitable MNEs to countries worldwide, ensuring that these firms pay a fair share of tax wherever they operate and generate profits.” This new deal was finally agreed upon by member countries after years of negotiations as different countries seek to bring the international tax system into21st century.
The “Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy” was agreed by 136 jurisdictions (out of the 140 members of the OECD/G20 Inclusive Framework on BEPS) which updates and finalizes a political agreement by the members of the Inclusive Framework, as they all seek to reform international tax rules. Estonia, Ireland and Hungary joined the agreement, which meant that the reform is now approved by all OECD and G20 countries. Kenya, Nigeria, Pakistan and Sri Lanka have not joined the agreement.
On Oct. 13, 2021 a meeting between the G20 Finance Ministers will take place in Washington D.C., where they will receive the “Two-Pillar Solution”, and afterwards to the Leaders Summit in Rome at the end of October. Pillar One states that, “Taxing rights on more than US$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.”
On the other hand, “Pillar Two introduces a global minimum corporate tax rate set at 15 percent. The new minimum tax rate will apply to companies with revenue above EU$750 million and is estimated to generate around US$150 billion in additional global tax revenues annually.” This pillar seeks to find more benefits as well, including the stabilization of the international tax system and the increased tax certainty for tax payers and tax administrations.
OECD Secretary-General, Mathias Cormann said that, “Today’s agreement will make our international tax arrangements fairer and work better.” As the OECD also declared that developing countries that have played a role in the negotiations and members of the Inclusive Framework will receive comprehensive capacity building support if needed.