OECD: Yield of Global Tax Reform is Much Higher

OECD: Yield of Global Tax Reform is Much Higher

The additional revenues resulting from the global tax reform agreed upon by 135 countries are tens of billions of dollars higher than estimated. The Organization for Economic Cooperation and Development (OECD) reports this after its calculations.

The partnership led the talks that resulted in a historic agreement in 2021 to allow countries to benefit more from profits that multinationals make within their borders.

The reform was necessary because many companies, including digital concerns such as Facebook or Amazon, make their profits in countries where they are not located. In addition, some countries compete with lower tax rates to lure businesses. This would hinder poorer countries, in particular, in collecting tax money.

In 2021, the countries agreed, among other things, to set their minimum tax rate for corporate profits at 15 percent. This should prevent certain countries from trying to lure companies with ever-lower taxes. The OECD now thinks this reform would generate $220 billion in additional tax revenues annually. The organization previously assumed 150 billion in extra benefits for the treasury, but this amount would be much higher due to increased profits.

Another agreement is that multinationals pay taxes in their home country and the countries where the company made those profits. According to new calculations, annual profits amount to USD 200 billion, on which these new taxes could be levied. In an earlier estimate, the OECD still spoke of a profit of USD 125 billion.

Especially now that increased profits of large internet companies can provide extra tax revenue, it is essential, according to the organization, to speed up the reforms. In December, the European Union agreed to introduce the minimum corporate income tax rate. These steps are also announced in the budget plans of Canada and the United Kingdom.

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