Progress on sharing tax revenue on multinationals — OECD

PARIS, France — Nearly 140 countries have taken a first step towards reaching agreement on a fairer distribution of tax revenues from multinational firms, the OECD said Wednesday.

Some 138 countries, which account for over 90 percent of global economic output, agreed on a first draft of a multilateral convention on how to tax these companies.

This development came after two days of talks hosted by the Organisation for Economic Co-operation and Development in Paris.

Multinationals, especially tech firms, are currently able to shift profits easily to countries with low tax rates even though they carry out only a small part of their activities there. 

In 2021, in talks led by the OECD, agreement was reached on a minimum tax rate of 15 percent on multinationals and to develop rules on how to tax multinationals so countries don't lose out by profit shifting.

But the talks on arriving at a formula on taxing multinationals moved forward slowly.

However the OECD said the progress made this week permits moving forward with the "historic, major reform of the international tax system".

Lily Batchelder, assistant US Treasury secretary for tax policy, said the OECD outcome statement reflects "significant progress".

But "there remain important issues to resolve" on a part which would protect US businesses against discriminatory digital services taxes and other unilateral measures, she added in a statement.

Countries also pledged to hold off on imposing newly enacted digital services or similar taxes before December 2024 or the entry into force of the new multilateral convention, provided there is sufficient cooperation towards its signature.

According to OECD estimates, the introduction of a minimum tax rate on multinationals should generate an additional $220 billion in revenues. The rules on taxing multinationals should bring between $13 billion and $36 billion.

OECD Secretary-General Mathias Cormann said the reforms "will provide stability for the international tax system, making it fairer and work better in an increasingly digitalised and globalised world."

French Finance Minister Bruno Le Maire said the text on the multilateral convention is "ready to be signed" and called it excellent news.

"The battle to get multinational firms to pay their fair share of taxes has lasted more than six years," said Le Maire.

He called on countries to redouble their efforts to resolve outstanding questions, including at the G20 meeting of finance ministers that begins Friday in India.