More than 130 OECD countries approve new global corporate tax plan

More than 130 countries in the Organization for Economic Cooperation and Development (OECD) have endorsed a global tax plan aimed at ensuring fair taxation for companies based on their operational presence rather than just their headquarters.

Out of the 143 countries in the group, only Canada, Belarus, Pakistan, Russia, and Sri Lanka have yet to approve the proposal, which will continue to be discussed in the coming months.

Alongside the global tax plan, OECD members have agreed to extend the prohibition on national taxes on technology companies until 2025.

This measure, initially implemented in 2021, aims to prevent tax disputes between countries during the development of a comprehensive global tax framework.

The extension provides countries with additional time to deliberate on a unified global tax proposal.

Currently, negotiations are focused on the implementation of “Pillar I,” a crucial component of the global tax plan.

This measure has the potential to redirect approximately US$200 billion in annual profits from technology multinational corporations to the countries where their sales occur. However, such a change necessitates an adjustment to global tax legislation.

The second pillar of the proposal seeks to eliminate tax competition among nations and establish a global minimum tax rate of 15% starting from next year.

This measure aims to discourage countries from engaging in tax practices that attract investment by offering exceptionally low tax rates.

According to the OECD agreement, the global tax plan requires the signature of at least 30 countries, representing a minimum of 60% of the 100 companies affected by the proposed changes.