A group of 136 countries on Friday set a minimum global tax rate of 15% for big companies and sought to make it harder for them to avoid taxation in a landmark deal that U.S. President Joe Biden said levelled the playing field, Trend reports citing Reuters.
The deal aims to end a four-decade-long "race to the bottom" by setting a floor for countries that have sought to attract investment and jobs by taxing multinational companies lightly, effectively allowing them to shop around for low tax rates.
Negotiations have been going on for four years and while the costs of the coronavirus pandemic gave them additional impetus in recent months, a deal was only agreed when Ireland, Estonia and Hungary dropped their opposition and signed up.
Moreover the 15% floor agreed is well below a corporate tax rate which averages around 23.5% in industrialised countries.
"Establishing, for the first time in history, a strong global minimum tax will finally even the playing field for American workers and taxpayers, along with the rest of the world," Biden said in a statement.
The deal aims to stop large firms booking profits in low-tax countries such as Ireland regardless of where their clients are, an issue that has become ever more pressing with the growth of "Big Tech" giants that can easily do business across borders.
Out of the 140 countries involved, 136 supported the deal, with Kenya, Nigeria, Pakistan and Sri Lanka abstaining for now.
The Paris-based Organisation for Economic Cooperation and Development (OECD), which has been leading the talks, said that the deal would cover 90% of the global economy.
"We have taken another important step towards more tax justice," German Finance Minister Olaf Scholz said in a statement emailed to Reuters.
"We now have a clear path to a fairer tax system, where large global players pay their fair share wherever they do business," his British counterpart Rishi Sunak said.
But with the ink barely dry, some countries were already raising concerns about implementing the deal.
The Swiss finance ministry demanded in a statement that the interests of small economies be taken into account and said that the 2023 implementation date was impossible, while Poland, which has concerns over the impact on foreign investors, said it would keep working on the deal.