A TOTAL OF 130 countries have agreed a global tax reform ensuring that multinationals pay their fair share wherever they operate, but Ireland was not among them.

The Organisation for Economic Co-operation and Development said in a statement that
global companies, including Google, Amazon, Facebook, and Apple would be taxed at a rate of at least 15% once the deal is implemented.

“The framework updates key elements of the century-old international tax system, which is no longer fit for purpose in a globalised and digitalised 21st century economy,” the OECD said.

But European Union low-tax countries Ireland and Hungary declined to sign up to the
agreement reached in the OECD framework, the organisation said, highlighting lingering
divisions on global taxation.

Both countries are part of a group of EU nations also including Luxembourg and Poland that have relied on low tax rates to attract multinationals and build their economies.

Ireland, the EU home to tech giants Facebook, Google and Apple, has a corporate tax rate of just 12.5%.

Finance Minister Paschal Donohoe previously warned that the new rules, if achieved, could see Ireland lose 20% of its corporate revenue.

The Department of Finance said it “broadly supports” the OECD framework but was not in a position to join the consensus due to its noted reservation about the proposal for a global minimum effective tax rate of at least 15%.

“I was not in a position to join the consensus on the agreement and specifically a global minimum effective tax rate of ‘at least 15%’ today,” Minister Donohoe said in a statement.

“I have consistently spoken of my desire for a comprehensive, sustainable and equitable agreement on the international tax rules at the OECD that meet the needs of all countries, large and small, developed and developing.

“I have expressed Ireland’s reservation, but remain committed to the process and aim to find an outcome that Ireland can yet support. Ireland will continue to play our part in reaching a comprehensive and, indeed, historic agreement”.

The formal agreement follows an endorsement by the G7 group of wealthy nations last month at a meeting in Britain. The negotiations now move to a meeting of the G20 group of developed and emerging economies on July 9-10 in Venice, Italy.

Nine of the 139 participants in the talks have so far not signed on to the agreement.
But China, whose position was being closely watched as it offers tax incentives to key sectors, endorsed the agreement.

‘In everyone’s interest’

US President Joe Biden said the latest deal “puts us in striking distance of full global
agreement to halt the race to the bottom for corporate taxes.” US Treasury Secretary Janet Yellet called it “historic”.

Germany, another backer of the tax reform, hailed it as a “colossal step towards tax justice”, and France said it was “the most important tax agreement in a century”.

British finance minister Rishi Sunak, whose country holds the G7 presidency, said “the fact that 130 countries across the world, including all of the G20, are now on board, marks a further step in our mission to reform global tax”.

“It is in everyone’s interest that we reach a final agreement among all Inclusive Framework Members as scheduled later this year,” said OECD Secretary-General Mathias Cormann.

“This package does not eliminate tax competition, as it should not, but it does set multilaterally agreed limitations on it,” Cormann said, adding that “it also accommodates the various interests across the negotiating table, including those of small economies and
developing jurisdictions”.

Finance chiefs have characterised a minimum tax as necessary to stem competition between countries over who can offer multinationals the lowest rate.

For Biden, a global tax agreement will help maintain US competitiveness since he has
proposed hiking domestic corporate taxes to pay for an infrastructure and jobs programme with a price tag of around $2 trillion.

Biden hailed an “important step in moving the global economy forward to be more equitable for workers and middle-class families in the United States and around the world.”

He noted that those nations who signed up make up more than 90% of the world’s
economy.

The OECD’s statement said the package “will provide much-needed support to governments needing to raise necessary revenues” to fix their budgets and invest in measures to back the post-Covid recovery.

An agreement for implementation is planned for October, it said.

- With reporting from Adam Daly