Global corporate tax deal nears as holdouts drop objections

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PARIS, Oct 8 (Businesshala) – After Ireland, Estonia and Hungary agreed to sign a deal to make it harder for large companies to pay a minimum tax rate of at least 15% and avoid taxation The global deal is set to be finalized on Friday. Above, leaving a few holdouts isolated.

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The agreement aims to end a four-decade-long “race to the bottom” by governments that have sought to attract investment and jobs by taxing multinationals only lightly and allowing them to shop for lower tax rates.

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Negotiations have been going on for four years, running online during the pandemic, with support for a deal from US President Joe Biden and additional incentives to cushion the costs of COVID-19 in recent months. About 140 countries are now involved.

The Paris-based Organization for Economic Co-operation and Development, which is leading the talks, is due to announce the outcome of Friday’s discussions around 1600 GMT.

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The agreement would set a minimum corporate tax rate of 15% and allow governments to tax a substantial portion of the profits of foreign multinationals.

It aims to prevent large groups from booking profits in low-tax countries like Ireland, regardless of where their customers are, an issue that has become more pressing with the rise of tech giants that easily cross borders. do business.

Ireland and Estonia dropped their objections earlier on Thursday while Hungary said on Friday it would sign up.

Finance Minister Mihaly Varga told reporters that Hungary’s demand for a 10-year transition period had been met “so that Hungary could enter into the deal with a good heart”.

“It is a difficult and complicated decision, but I believe it is the right one,” said Irish Finance Minister Pascal Donohoe on Ireland’s decision to drop its prized 12.5% ​​tax rate for large multinationals After agreeing.

Announcing Tallinn’s support, Estonian Prime Minister Kaja Kailas said that the minimum tax would not change anything for most Estonian entrepreneurs.

Businesshala Graphics

But some developing countries called for a higher minimum tax rate, saying their interests were sidelined to accommodate the interests of wealthy countries such as Ireland, who signed an agreement with a minimum tax rate higher than 15%. had refused.

Argentina’s Economy Minister Martin Guzmán said on Thursday that the proposals on the table forced developing countries to choose between “something bad and something bad”.

Holdouts may not prevent the deal from progressing, but they do run the risk of not taking profits, even if they are minor.

While Argentina reluctantly signed the previous version of the deal, both Kenya and Nigeria barred it, while India, which also backed the previous edition, has expressed concerns.

Once a deal is revealed on Friday, it will go to the finance ministers of the Group of 20 economic powers to formally endorse at a meeting in Washington next week.

However, some questions remain about the position in the US that hinges on tough domestic tax reform talks underway in Congress.

Countries withdrawing the deal should put it on their law books next year so that it can take effect from 2023, which many officials close to the negotiations describe as extremely strict.

Reporting by Leigh Thomas; Editing by Katherine Evans

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