130 countries back deal on global minimum tax for companies

Frankfurt: Some 130 countries have backed a global minimum tax as part of a worldwide effort to keep multinational firms from dodging taxes by shifting their profits to countries with low rates.

The agreement announced by the Organisation for Economic Cooperation and Development on Thursday also provides for taxing the largest global companies in countries where they earn profits through online businesses but may have no physical presence.

The agreement followed a proposal from US President Joe Biden for at least a 15% rate, an initiative that propelled the talks toward meeting a deadline for a deal by the middle of this year. The deal now will be discussed by the Group of 20 countries at meetings later this year in hopes of finishing the details in October and implementing the agreement in 2023.

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Under the deal, countries could tax their companies’ foreign earnings if they go untaxed through subsidiaries in other countries. That would remove the incentive to use accounting and legal schemes to shift profits to low-rate countries since the profits would be taxed at home anyway.

Not all of the 139 countries that joined the talks signed on to the deal.

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