Nearly 140 countries have taken a first step towards an international agreement guaranteeing a “fairer distribution” between states of tax revenues from the profits of multinationals, the OECD announced on Wednesday 12 July.
The 138 States gathered Monday and Tuesday in Paris under the aegis of the Organization for Economic Co-operation and Development (OECD) agreed on a first draft of a “multilateral convention” on Tuesday. However, several sticking points will still have to be resolved before arriving at the final version of the text, which each State will then have to ratify.
“A historic step”
Until now, the largest multinationals, in particular the giants of the web, could choose to be taxed in countries with favorable taxation where they nevertheless exercised only a small part of their activity. Since 2017, the OECD has been coordinating international negotiations aimed at ensuring that each country has tax revenues that are better proportionate to the real activity of multinationals on their territory.
With the draft agreement announced on Tuesday, the OECD claims to have taken “a historic step” in its two-pronged reform of the international tax system.
A struggle of more than six years
In October 2021, common ground had been found on the creation of a global minimum tax of 15% on the profits of multinationals, the “pillar two” of the OECD reform, in the process of being applied by fifty states. But for several months, the negotiations stumbled on the “pillar one”, supposed to put an end to the tax optimization of the giants of the world economy. This step reflects the “significant progress” made, but “significant issues remain to be resolved” in particular to “protect American businesses from discriminatory taxes on digital services and other unilateral measures”, said Lily Batchelder, in charge of the tax policy to the US Treasury, in a statement.
According to the OECD, the global minimum corporate tax is expected to generate $220 billion in additional tax revenue each year. If “pillar one” of the reform is adopted, an additional amount of between 13 and 36 billion dollars is expected.
Qualifying the progress concluded on Tuesday as “excellent news”, the French Minister of Economy and Finance Bruno Le Maire recalled in a message to the press that it was “a fight of more than six years so that the big multinationals pay their fair share of taxes.”
“The text implementing pillar 1 is now ready to be signed,” said Bruno Le Maire. “I call on all states to redouble their efforts to find a compromise on the last political issues to be discussed,” he added, particularly during the meeting of G20 finance ministers scheduled for India on 14 to July 18.