The EU has welcomed a “historic global agreement” endorsed by G20 Finance Ministers and Central Bank Governors last week.
The agreement aims to reform of the international corporate tax system, including a reallocation of taxing rights that will mean the world’s largest companies will have to pay tax wherever they conduct business. A global minimum effective tax rate of at least 15 per cent will also help curb aggressive tax planning and stop the corporate tax “race to the bottom”, the EU said.
“The G20 has endorsed the unprecedented global agreement on corporate tax reform reached last week and now supported by 132 jurisdictions,” said European Commissioner for Economy, Paolo Gentiloni on July 10.
“A bold step has been taken, one that few would have thought possible just a few months ago. This is a victory for tax fairness, for social justice and for the multilateral system. But our work is not done. We have until October to finalise this agreement. I am optimistic that we will be able in that time also to reach a consensus among all European Union Member States on this crucial issue,” he added.
The work under the auspices of the Organization for Economic Co-operation and Development (OECD) Inclusive Framework focuses on adapting the international rules on how the taxation of corporate profits is shared amongst countries, to reflect the changing nature of business models, including the ability of companies to do business without a physical presence. Under the new rules, a share of the excess profits of the largest, most profitable Multinational Enterprises would be redistributed to market jurisdictions, where consumers or users are located.
It also aims to ensure that multinational businesses are subject to a minimum effective level of tax on all of their profits each year. This will be set at a rate of at least 15 per cent, and would apply to all multinational groups making more than 750 million euros in combined financial revenues.
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