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Australia signs on for global trade floor
Australia is set to gain up to $3 billion in additional tax revenue after agreeing with world leaders to sign on to new rules as to where profits for multinationals should be taxed as well as a new minimum world rate.
Australia signs on for global trade floor
Australia is set to gain up to $3 billion in additional tax revenue after agreeing with world leaders to sign on to new rules as to where profits for multinationals should be taxed as well as a new minimum world rate.
Most of the countries negotiating a global overhaul of cross-border taxation of multinationals have backed plans for new rules on where companies are taxed at a minimum tax rate of 15 per cent, following two days of talks.
It said 130 countries, representing more than 90 per cent of global GDP, had backed the agreement at the latest Paris-based Organisation for Economic Cooperation and Development, with only nine disagreeing with the new tax plan.
The new rules on where the biggest multinationals are taxed would shift taxing rights on more than $100 billion of profits to countries where the profits are earned.
“With a global minimum tax in place, multinational corporations will no longer be able to pit countries against one another in a bid to push tax rates down,” US President Joe Biden said in a statement.
However, the minimum corporate tax does not require countries to set their rates at the agreed floor, instead other countries have a right to apply a levy to the minimum on companies’ income coming from another country with a lower tax rate.
The nine countries that did not sign were the low-tax EU members Ireland, Estonia and Hungary as well as Peru, Barbados, Saint Vincent and the Grenadines, Sri Lanka, Nigeria and Kenya.
Treasurer Josh Frydenberg was quick to welcome the deal on Friday, saying multinational tax avoidance was “not just a domestic issue but a global one”.
“At the upcoming G20 finance ministers and central bank governors meeting in July, I will work with my international counterparts on the remaining elements of the agreement before finalising the implementation plan in October.
“Australia’s ongoing engagement in the OECD-led multilateral process complements the strong action the government has taken to strengthen the integrity of Australia’s corporate tax system and prevent multinational tax avoidance.”
OECD secretary-general Mathias Cormann described the package as a result of years of intense work and negotiations.
“After years of intense work and negotiations, this historic package will ensure that large multinational companies pay their fair share of tax everywhere,” Mr Cormann said.
The OECD secretary-general said the package does not eliminate tax competition, as it should not, but it does set multilaterally agreed limitations on it.
“It also accommodates the various interests across the negotiating table, including those of small economies and developing jurisdictions. It is in everyone’s interest that we reach a final agreement among all Inclusive Framework Members as scheduled later this year,” Mr Cormann concluded.
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