The new global tax will bring countries $150 billion in revenue

An agreement on changes to the global tax system will limit tax competition and provide countries with approximately $150 billion in additional revenue, necessary in the post-pandemic period, announced the Organisation for Economic Co-operation and Development (OECD).

Negotiations on the new tax system began under the auspices of the OECD nearly a decade ago to establish a common framework for taxing multinational companies and to close tax "gaps" that allow digital companies to avoid tax obligations.

A minimum global corporate tax rate of at least 15 percent has been proposed, which is expected to limit tax competition and enable the protection of tax bases, the OECD states.

Part of the package of new tax regulations includes the redistribution of taxing rights for the largest companies, the organization emphasizes, explaining that part of the rights will be redirected from the home countries of the companies to those in which they operate, the OECD highlighted.

The proposals will provide much-needed support to governments trying to fill budgets during a period of increased investment in public services, infrastructure, and measures necessary to create conditions for recovery in the post-pandemic period, the OECD emphasizes. 

The redistribution of tax rights is expected to open the possibility of taxing more than $100 billion in profits annually, and the minimum global tax rate of at least 15 percent is estimated to generate around $150 billion in additional revenue each year.

Additional benefits will manifest in the stabilization of the international tax system and improved tax transparency for tax administrations and taxpayers, they add.

The proposal was supported on Thursday by 130 out of 139 members of the OECD and G20 initiative to combat base erosion and profit shifting, including Croatia, according to a list on the OECD website.

Nine members of the initiative have not yet joined the statement on the agreement, it further states that they have not expressed support.

The nine have not yet supported the initiative, the OECD states. The list shows that Ireland and Barbados are among them.

– This historic package, after years of intensive work and negotiations, will ensure that large multinational companies pay fair taxes everywhere –  emphasized OECD Secretary-General Mathias Cormann.

Consideration was also given to the interests of small economies and those in development, he added.

– The package does not eliminate tax competition nor was that its goal, but it sets multilateral agreed limits –  concluded the head of the OECD.

The remaining elements of the new tax system are expected to be completed by October of this year, and the plan for the introduction of new regulations by 2023, the statement says.