The Organization for Economic Co-operation and Development (OECD), a partnership of rich countries, announced this on Friday evening. The 136 countries and territories together account for 90 percent of global GDP.
The reform must put an end to tax avoidance. According to the OECD, the agreement will also redistribute nearly €110 billion a year in profits among the 100 largest companies. This is especially good news for developing countries.
Under the new system, companies will actually pay tax in the country where the profit is made. At present, multinationals such as Facebook and Amazon are still putting their profits in the books in a country with little or no corporate tax.
Earlier this year, 130 countries already supported the tax plans, but Ireland, Estonia and Hungary, among others, opposed it. Now that they have also approved the deal, the minimum rate is supported by all OECD and G20 countries. Only Kenya, Nigeria, Pakistan and Sri Lanka disagree.
“Today’s agreement will make our international tax systems fairer and work better,” said OECD chief Mathias Cormann. “This is a major victory. We must now work hard to ensure that this important reform is implemented effectively.”
Corporate income tax is a tax levied on the profits of companies. The Netherlands, which is often classified as tax havens, has a relatively high income tax rate. Up to 245,000 euros it is 15 percent, above that at 25 percent. In Germany and France it is even a few percent more.