130 of the 139 countries involved in the Global Tax Reform talks have agreed to sign up to the deal following long negotiations at the OECD in Paris.
What is the Global Tax Reform Deal?
The Global Tax Reform Deal has been designed to force multinational companies to pay a global minimum corporate tax rate of 15%, ensuring some of the largest digital giants such as Google, Amazon, Facebook, Apple and Nike can no longer lower their taxes by shifting their profits out of markets such as the UK into low-tax areas.
Chancellor Rishi Sunak claimed that the deal would ensure “multinational tech giants pay the right tax in the right countries”
The deal also intended to prevent countries such as Ireland and the Caribbean from competing to offer the lowest tax rates to attract investment, however, Ireland was one of the nine countries which refused to sign up to the deal.
US President Joe Biden said:
“With a global minimum tax in place, multinational corporations will no longer be able to pit countries against one another in a bid to push tax rates down and protect their profits at the expense of public revenue.”
What Does the Global Tax Reform Deal Mean for Your Business?
At the time of writing, we can’t be 100% sure of exactly what this means for all businesses, but it is most likely this reform will only cause the huge multinational enterprises to see a noticeable difference, as the reform also means businesses will have to start paying tax in the country they make their profits in, not where their headquarters are, which could result in tax havens becoming a thing of the past.
As aforementioned, the main aim of this new deal was to ensure a global minimum corporate tax rate of 15%, which should see an end to countries competing to offer the lowest possible rates, to incentive businesses to set-up headquarters within the country in question. Many people/politicians have been campaigning for some time to ensure tax rates are fair for all, and this deal should bring this closer to reality.
“A detailed implementation plan together with remaining issues will be finalised by October 2021,” said a statement signed by 130 out of 139 countries and jurisdictions involved in the talks.
The deal was welcomed news by finance ministers, with Rishi Sunak citing last month’s G7 meetings, where leading nations agreed to try and crack down on tax avoidance:
“We achieved a historic agreement that will see the largest multinational tech giants pay the right tax in the right countries.
“I’m pleased to see this momentum has continued and welcome the OECD’s progress today.
“I look forward to continuing discussions with our global partners in the coming months with a view of finalising the details by October,” he said.
For any more information on taxes, get in touch with our professional team at Ryans Chartered Accountants today, either via our online contact form or by calling us on 01204 523263.