World leaders have agreed to a minimum 15% tax rate kicking in from 2023.
On Friday, the Organisation for Economic Cooperation and Development (OECD) representing 140 countries made the announcement calling it a “landmark deal.”
“Today’s agreement will make our international tax arrangements fairer and work better,” said OECD Secretary-General Mathias Cormann. “This is a major victory for effective and balanced multilateralism. It is a far-reaching agreement that ensures our international tax system is fit for its purpose in a digitalized and globalized world economy. We must now work swiftly and diligently to ensure the effective implementation of this major reform."
However, four countries--Kenya, Nigeria, Pakistan, and Sri Lanka--have not joined the agreement yet.
After a lot of negotiations, Estonia, Hungary, and, most importantly, Ireland said ‘Yes’ to the agreement.
The 15% tax rate will not be applied to small businesses.
“The new minimum tax rates will be applied to companies with revenue above EUR 750 million and is estimated to generate around USD 150 billion in additional global tax revenues annually," the statement from OECD read.
U.S. Treasury Secretary Janet Yellen called the agreement “once-in-a-generation accomplishment” for economic diplomacy.
"This deal is a victory for American families, who will benefit from the revenues from this deal raises to pay for infrastructure, child care, and clean energy; it's a win for American businesses, which will no longer have to compete on an international playing field tilted against them...," Yellen said, in a statement.