- The OECD published a multilateral treaty to replace national digital services taxes.
- The treaty puts pressure on the US to ratify it.
- The treaty is the first pillar of a two-pillar overhaul of cross-border taxation rules for multinational companies.
- Many countries complain about the fragmented tax system that allows multinational companies to pay little tax in jurisdictions where they make large revenues.
- The treaty codifies how governments are to reallocate taxing rights on about $200 billion in profits from the biggest and most profitable multinationals to the countries where their sales occur.
- The reallocation is estimated to yield additional global tax revenue of between $17 billion and $32 billion, with low and middle-income countries gaining the most.
- The treaty requires countries with national digital services taxes to drop them if ratified.
- The US is sensitive to this issue as many of these taxes target big US digital companies.
- The treaty needs to be ratified by 30 countries home to at least 60% of the affected multinational companies, including the US.
- Failure to ratify the treaty could lead to “grave consequences” and threaten the stability of the international system.
- The second pillar of the 2021 global corporate tax deal sets a minimum corporate tax rate of 15%.
Source: reuters.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
