136 nations around the world have signed up to an agreement to enforce a 15% minimum corporate tax rate. This follows on from concerns that the biggest multinational companies have been re-routing their profits through jurisdictions with low tax rates.
Rishi Sunak, UK Chancellor, claimed that the deal would help to “upgrade the global tax system for the modern age.”
He added: “We now have a clear path to a fairer tax system, where large global players pay their fair share wherever they do business”.
The deal is set to target massive companies such as Facebook and Amazon who have global sales above £17bn, and profit margins above 10%.
Mathias Cormann, Secretary-General of the Organisation for Economic Cooperation and Development (OECD) said: “[This] is a far-reaching agreement which ensures our international tax system is fit for purpose in a digitalised and globalised world economy.
“We must now work swiftly and diligently to ensure the effective implementation of this major reform.”
Mixed reactions from around the world
Countries who have offered lower tax rates in the past were hesitant to introduce this 15% minimum corporate tax rate. Countries such as Ireland, Estonia, and Hungary – all of whom currently have tax rates below 15% – previously held lower corporate taxes but have since agreed to the new rates.
US Treasury Secretary, Janet Yellen, said: “As of this morning, virtually the entire global economy has decided to end the race to the bottom on corporate taxation.
“Rather than competing on our ability to offer low corporate rates, America will now compete on the skills of our workers and our capacity to innovate, which is a race we can win.”
Some corporations such as Facebook have welcomed the moves, while some parties have claimed that the tax rates do not go far enough. Argentina and charity Oxfam claim that the rates are should be higher to avoid letting the biggest of corporations “off the hook”.