136 out of 140 countries join global tax deal as OECD hails "major victory"
Ireland was the 135th country to sign up to the agreement.
The Organisation for Economic Cooperation and Development (OECD) has announced that 136 countries and jurisdictions have agreed to a major reform of the international tax system.
The OECD says the deal, which was finalised on Friday (8 October), will ensure that large multinationals will be subject to a minimum 15% tax rate from 2023.
The new minimum tax rate will apply to companies with revenue above €750 million and comes after years of efforts to make sure multinational enterprises pay a fair share of tax wherever they operate.
Of the 140 countries which engaged in the OECD process, Kenya, Nigeria, Pakistan and Sri Lanka have not yet joined the agreement.
Ireland joined the deal on Thursday night, alongside Estonia, before Hungary signed up on Friday - meaning all EU member states are part of it.
— OECD ➡️ Better policies for better lives (@OECD) October 8, 2021
While 130 countries and jurisdictions signed up to the plan in July, Ireland did not as the OECD's draft agreement had said the new corporate tax rate set would be “at least 15%“.
This led to concerns from those within the Irish government that the rate could later increase from 15%.
However, this updated version of the agreement removes the wording "at least", setting the rate at 15%, thus enabling Ireland to sign up to the agreement.
“Today’s agreement will make our international tax arrangements fairer and work better,” said OECD Secretary-General Mathias Cormann in a statement.
“This is a major victory for effective and balanced multilateralism. It 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."
Meanwhile, Ireland's Finance Minister Paschal Donohoe in a statement on Friday welcomed the agreement reached by the OECD.
"This landmark agreement will address global tax challenges of digitalisation and provide the certainty and stability that large businesses and Government need," he said.
"Ireland’s long-standing corporation tax rate of 12.5% will continue to apply to the vast majority of our businesses who provide the lion’s share of employment in Ireland."
G20 leaders are expected to formally sign off on the agreement when they meet in Rome at the end of October.
Main image via Julien Behal / RollingNews.ie