Global tax overhaul nears historic deal amid last-minute hurdles

A total of 130 countries, including Argentina, have agreed to push for a more balanced international corporate tax system.

The deal is a victory for the Joe Biden administration and its global allies, although it still faces multiple significant obstacles to completing an ambitious plan that has been years in the making.

The boost came during a round of talks hosted by the Organisation for Economic Cooperation and Development (OECD), where 130 countries and jurisdictions backed a plan to set a minimum corporate tax rate and establish a new regime for sharing the taxes imposed on the profits of multinational firms.

Even as governments hailed the news, the agreement remains well short of a done deal. A handful of countries refused to sign on. Most importantly, resistance came from three European Union members, any of which could prevent the 27-member bloc from implementing the plan.

The US Congress could also prove a major obstacle, since the legislature’s approval would be required to formalise Washington’s participation in the system, and Biden’s Democratic party holds razor-thin majorities that are at risk in next year’s midterm elections.

Thursday’s deal leaves several details in the proposals unresolved, including important questions over how and when some countries’ unilateral taxes on tech firms’ revenue will be rolled back.

The overhaul is aimed at helping countries share the spoils from multinational firms like Facebook Inc and Alphabet Inc’s Google, with implementation targeted for 2023. The rules would curtail tax avoidance by making global enterprises pay an effective rate of “at least 15%” and give smaller countries more tax revenue from foreign firms.

Several key countries that had been question marks agreed to the terms, including India, China and Turkey, according to the OECD. Argentina and Turkey came on board at the last moment, according to officials familiar with the negotiations, and the technical details may leave room for further concessions to developing economies.

Economy Minister Martín Guzmán hailed the "broad international consensus" that allows "an important step" to be taken in the fight against "tax avoidance by multinational companies."

Guzmán said that the 15-percent rate "is still below what we consider optimal," but that Argentina had decided to support the consensus agreement.

– TIMES/BLOOMBERG/NA