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More than 145 countries have agreed to exempt US multinationals from paying more corporate taxes overseas, watering down a landmark 2021 deal.
The agreement comes six months after G7 economies negotiated a carve-out for US companies from parts of a global minimum corporate tax deal, in an effort to salvage multilateral tax co-operation.
In 2021, in a deal brokered by the OECD, countries agreed to introduce a minimum effective corporate tax rate of 15 per cent to stop companies from booking global profits in countries with the most advantageous regimes.
But under President Donald Trump, the US reneged on that deal, demanding exemptions for its multinationals and threatening to impose “revenge taxes” on investors from countries whose regimes it perceived as discriminating against US companies.
The OECD said on Monday that there would be “safe harbours” for multinationals whose parent company is located in a jurisdiction judged to meet “minimum taxation requirements”.
Negotiations over the final text stretched into the new year after China as well as Poland, Estonia and the Czech Republic objected to an initial text proposed for adoption in December.
China wanted to obtain a similar carve-out to the US, while Poland, Estonia and the Czech Republic raised issues about the competitiveness of EU businesses, which are already subject to the minimum 15 per cent corporate tax rate.
The European countries lifted their objections in December, after reassurances that the final agreement would be reviewed regularly to ensure a level playing field, while Beijing did so in recent days, according to people close to the negotiations.
The package agreed on Monday includes a review clause that could potentially allow other countries to access the same carve-outs as the US if they have implemented a global minimum tax by 2027.
Manal Corwin, head of tax at the OECD, told the Financial Times that the agreement “is not an abandonment of the global minimum tax, it is a reinforcing of that policy goal”.
But Alex Cobham, chief executive of the Tax Justice Network pressure group, said: “In this case, Trump didn’t chicken out . . . the US got what it wanted and everybody else has gone along.”
The package agreed on Monday also introduced a series of simplification measures aimed at reducing compliance burdens for multinationals and tax authorities. A study last year estimated that the global minimum tax rules would result in total one-off implementation costs of €1.2bn and recurring annual costs of €517mn for European businesses.
The package introduced exemptions for certain types of tax incentives used by countries to attract multinationals, so long as these are “strongly connected to economic substance”.
“This is a welcome step that stabilises the global tax system, simplifies rules, ensures fairness and keeps businesses competitive,” said Wopke Hoekstra, the EU commissioner in charge of tax, in a post on X.
