Some 136 countries agreed to enforce a corporate tax rate of at least 15%, as well a fairer system of taxing profits where they are earned. It follows concern that multinational companies are re-routing their profits through low tax jurisdictions to cut their bills. Yet critics say a 15% rate is too low, and firms will get around the rules. UK Chancellor Rishi Sunak said the deal would “upgrade the global tax system for the modern age”. “We now have a clear path to a fairer tax system, where large global players pay their fair share wherever they do business,” he said. The Organisation for Economic Cooperation and Development (OECD), an intergovernmental organisation, has led talks on a minimum rate for a decade. It said the deal could bring in an extra $150bn (£108bn) of tax a year, bolstering economies as they recover from Covid. Yet it also said it did not seek to “eliminate” tax competition between countries, only to limit it.
The floor under corporate tax will come in from 2023. Countries will also have more scope to tax multinational companies operating within their borders, even if they don’t have a physical presence there. The move – which is expected to hit digital giants like Amazon and Facebook – will affect firms with global sales above 20 billion euros (£17bn) and profit margins above 10%. A quarter of any profits they make above the 10% threshold will be reallocated to the countries where they were earned and taxed there.