Treasury Secretary Janet Yellen on Thursday announced that a group of 130 countries has agreed to a US proposal of Global Minimum Tax (GMT) on corporations, which is a part of a larger agreement to regulate international tax rules.
“For decades, the United States has participated in self-defeating international tax competition, lowering our corporate tax rates only to watch other nations lower theirs in response. The result was a global race to the bottom: Who could lower their corporate rate further and faster? No nation has won this race,” said Yellen in a statement on the accord.
“Today’s agreement by 130 countries representing more than 90 percent of global GDP is a clear sign: the race to the bottom is one step closer to coming to an end,” Yellen said.
The deal also reportedly includes a framework for eliminating digital services taxes, that targeted the biggest American tech companies.
Officials from all nations agreed to a new tax plan that will be linked to the places where multinational companies are actually doing business, instead of where their headquarter is.
Much of the groundwork for acceptance of a GMT has been laid by the Organization for Economic Cooperation and Development (OECD).
The OECD Inclusive Framework related to Base Erosion and Profit Shifting (BEPS) is the product of negotiations with 137 member nations and jurisdictions.
Yellen’s declaration didn’t consist of the actual rate at which the GMT would be set, but the Biden administration is pushing for at least 15%.
The finance ministers and central bank governors of G-20 nations will meet in Venice, Italy, later this month, and the Global Minimum Tax plan is expected to be a high priority.