PARIS (AFP) – Nearly 140 countries have taken a first step towards reaching agreement on a fairer distribution of tax revenues from multinational firms, the Organisation for Economic Co-operation and Development (OECD) said on Wednesday.
Some 138 countries, which account for over 90 per cent of global economic output, agreed on a first draft of a multilateral convention on how to tax these companies.
This development came after two days of talks hosted by the OECD in Paris.
Multinationals, especially tech firms, are currently able to shift profits easily to countries with low tax rates even though they carry out only a small part of their activities there.
In 2021, in talks led by the OECD, agreement was reached on a minimum tax rate of 15 per cent on multinationals and to develop rules on how to tax multinationals so countries don’t lose out by profit shifting.
But the talks on arriving at a formula on taxing multinationals moved forward slowly.
However the OECD said the progress made this week permits moving forward with the “historic, major reform of the international tax system”.
Assistant United States (US) Treasury Secretary for Tax Policy Lily Batchelder said the OECD outcome statement reflects “significant progress”.
But “there remain important issues to resolve” on a part which would protect US businesses against discriminatory digital services taxes and other unilateral measures, she added.
Countries also pledged to hold off on imposing newly enacted digital services or similar taxes before December 2024 or the entry into force of the new multilateral convention, provided there is sufficient cooperation.
According to OECD, the introduction of a minimum tax rate on multinationals should generate an additional USD220 billion in revenues.
