A global deal to tax big companies is delayed by a year
The most ambitious tax reform in a century faced a new setback on Monday when the Organization for Economic Co-operation and Development, which oversees global negotiations, said proposed rules for how the world’s largest companies should be taxed would not be revealed until halfway. Next year.
The delay is expected to push the age of the agreement, which was due by next year, to at least 2024. This will give negotiators more time to untangle the complex set of details of how to rewrite international tax treaties and enact a global minimum. A 15 percent tax in over 130 countries.
But it could also give governments more time to consider rolling back the agreement as concerns about inflation and global recession intensify and many countries, including the United States, undergo elections.
Matthias Cormann, Secretary-General of the Organization for Economic Cooperation and Development, wrote in a report to the finance ministers of the Group of 20 countries that will meet in Indonesia this week.
The tax pact, struck last October, aims to dramatically increase taxes on many large companies and end the international struggle over how to tax tech companies. Its engineers said it would end the global “race to the bottom” of corporate tax rates.
The two-pronged approach entails countries enacting a minimum tax of 15 percent so that companies pay a rate no less than that on their global profits no matter where they shop. It would also allow governments to tax the world’s largest and most profitable companies by where their goods and services are sold rather than where they are.
Both parts of the agreement have been discontinued.
The OECD delay relates to the challenges negotiators faced in figuring out how to redistribute tax rights between countries.
“We will continue to work as quickly as possible to finish this work, but we will also take as much time as necessary to correct the rules,” Mr. Corman said in a statement. These rules will shape our international tax arrangements for decades to come. It is important to correct it.”
The age of the global minimum tax has faced hurdles in the United States and Europe.
Hungary prevents the European Union, which needs the unanimous support of its members, from enacting a minimum tax of 15 percent. Earlier, Poland temporarily withdrew its support for the agreement.
In the US, the Biden administration was planning to enact tax changes through a comprehensive climate and economic package that Democrats hoped to push along partisan lines last year. But that proposal largely collapsed, and the Treasury was instead hoping that changes necessary to bring the United States into compliance with the deal would be included in a narrower spending bill Democrats hope to pass this summer.
The Treasury had no immediate comment on the latest delay.