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2021-10-10

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www.thehindu.com

Relevant for: Economy | Topic: Issues relating to Growth & Development - Public Finance, Taxation & Black Money incl. Government Budgeting

U.S. Treasury Secretary Janet Yellen hailed it as a victory for American families as well as international business.

“We’ve turned tireless negotiations into decades of increased prosperity — for both America and the world. Today’s agreement represents a once-in-a-generation accomplishment for economic diplomacy,” Ms Yellen said in a statement.

The OECD said the minimum rate would see countries collect around $150 billion in new revenues annually while taxing rights on more than $125 billion of profit would be shifted to countries where big multinationals earn their income.

Ireland, Estonia and Hungary, all low tax countries, dropped their objections this week as a compromise emerged on a deduction from the minimum rate for multinationals with real physical business activities abroad.

But some developing countries seeking a higher minimum tax rate say their interests have been sidelined to accommodate the interests of richer countries like Ireland, which had refused to sign a deal with a minimum tax rate higher than 15%.

Argentine Economy Minister Martin Guzman said on Thursday that proposals on the table forced developing countries to chose between “something bad and something worse”.

While Kenya, Nigeria and Sri Lanka did not back a previous version of the deal, Pakistan’s abstention came as a surprise, one official briefed on the talks said. India also had qualms up to the last minute, but ultimately backed the deal, they added.

There was also dissatisfaction among some campaign groups such as Oxfam which said the deal would not end tax havens.

“The tax devil is in the details, including a complex web of exemptions,” Oxfam tax policy lead Susana Ruiz said.

“At the last minute a colossal 10-year grace period was slapped onto the global corporate tax of 15%, and additional loopholes leave it with practically no teeth,” Ms, Ruiz added in a statement.

The OECD said the deal would next go to the Group of 20 economic powers to formally endorse at a finance ministers’ meeting in Washington on Oct. 13 and then on to a G20 leaders summit at the end of the month in Rome for final approval. There remains some question about the U.S. position, which depends in part on domestic tax reform negotiations in Congress.


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