The most radical overhaul of the international tax system in a century is set to take a significant step forward this week, with nearly 140 countries, including Ireland and Estonia, expected to set a global minimum tax rate of 15%.
Negotiators were on the verge of agreeing on rates on Thursday ahead of Friday’s meeting at the Organization for Economic Cooperation and Development, which coordinates global tax negotiations. The tax rate has been the subject of intense negotiations for several months. If passed, it could help end the multi-year race for corporate taxation that allowed tax havens to flourish and drained countries’ revenues.
The structure in question includes a global minimum tax of 15% that each country will adopt, and new regulations that will force tech giants like Amazon and Facebook and other large global companies pay taxes in the countries where their goods or services are sold, even if they do not have a physical presence there.
Before Friday’s meeting, negotiators discussed the wording of a joint statement describing the tax rate, exemptions for certain types of companies and the implementation period that some countries want to stretch out over years. European opponents such as Ireland, Hungary and Estonia have been under intense pressure in recent months to join the agreement, which will require the approval of the 27 European Union countries.
After weeks of heated negotiations and pressure from the US and France, Ireland said it was ready to accept a minimum tax rate of 15% after Prime Minister Michael Martin told the Irish cabinet on Thursday that the rate would only apply to multinational giants. such as Facebook and Apple but not to Irish companies operating in Ireland.
At stake is Ireland’s low official corporate tax rate of 12.5% and a tax system that has helped global companies based there avoid paying taxes to other countries where they make a profit.
Estonia also signed on to the 15 percent rate on Thursday, according to a Twitter post by OECD Secretary General Matthias Korman.
The Treasury Department has expressed optimism that the deal will be completed when the leaders of the Group of 20 leading industrial nations meet in Rome later this month.