Global Minimum Tax Deal Reached, Faces Strong Opposition

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While many countries have backed a global tax deal, several are still debating whether or not to join.
While many countries have backed a global tax deal, several are still debating whether or not to join. (Image: Karolina Grabowska via Pixabay)

Nations of the G-7 and G-20 have come together to hash out a global tax deal that would drastically change international tax rules. The deal aims for a 15 percent global minimum tax among other changes to combat tax evasion and tax havens that have disadvantaged certain countries.

Global tax deal

The Organisation for Economic Cooperation and Development (OECD) has struck a global deal to “ensure that Multinational Enterprises (MNEs) will be subject to a minimum 15% tax rate from 2023.” This would force MNEs to pay the taxes wherever they operate, not just at their headquarters.

Representing more than 90 percent of global gross domestic product (GDP), around 140 countries and jurisdictions agreed to sign the deal. 

The agreement finally panned out after years of fruitless negotiations and has been the focus of finance ministers who wanted a reversal on a “decades-long race to the bottom of corporate tax rates,” which have made companies rely on low-tax jurisdictions and has prevented countries from obtaining the money needed for improvements and healthcare.

The deal also applies to digital areas, forcing technological enterprises like Amazon and Facebook to pay taxes wherever and however their products are sold. This would help spread out the 125 billion dollars in profits from “home countries of the 100 most profitable firms in the world.”

Many details have not yet come to light, as a timeline has not been set for existing “digital services taxes” to change or remain the same.

“International tax [policy making] is a complex issue, but the arcane language of today’s agreement belies how simple and sweeping the stakes are,” U.S. Treasury Secretary Janet Yellen said. “When this deal is enacted, Americans will find the global economy a much easier place to land a job, earn a living, or scale a business.”

Agreement to join

On Oct. 8, the Republic of Ireland decided to join the agreement, despite arguments and claims that its previous tax rate of 12.5 percent would help attract businesses to a smaller economy. On that same day, Hungary and Estonia also entered the agreement, while Kenya, Nigeria, Pakistan, and Sri Lanka held off.


“In joining this agreement, we must remember that there are 140 countries involved in this process and many have had to make compromises,” said Paschal Donohoe, Ireland’s Finance Minister, according to RTE. “But I also believe that the agreement [the] government has agreed to sign up to today is balanced and represents a fair compromise reflecting the interests and input of the many countries involved in the negotiations.”

As reported by RTE, the Irish Department of Finance estimated that the move would decrease Ireland’s tax take by 2 billion euros (2.3 billion dollars) a year. The Irish Times also released a poll, which showed the majority of Irish voters were not on board with modifying the country’s policy.

Assurance was given, as the deal was updated from a minimum corporate tax rate of “at least 15%” to just 15%, indicating that the rate would not be increased in the future. Hungary also hesitated to join the agreement but changed its mind when a long implementation period was agreed upon.

French finance minister Bruno Le Maire said that the political and financial consequences of the deal should not be overlooked, calling the agreement “historical.” He emphasized the importance of the deal to raise funds to combat the Coronavirus Disease 2019 (COVID-19) pandemic.

‘No Teeth’

Despite widespread support for the deal, some countries have voiced their disagreement. Some wished for higher tax rates, claiming their interests were ignored in favor of richer nations. Non-governmental organizations (NGOs) have also criticized the deal for its exemptions, with campaign group Oxfam saying it has “no teeth.”

“At the last minute a colossal 10-year grace period was slapped onto the global corporate tax of 15%, and additional loopholes leave it with practically no teeth,” said Oxfam tax policy lead Susana Ruiz.

The U.S. Congress would have to pass legislation for the tax deal, which could prove difficult since Republicans oppose the deal and have threatened to block it in Congress. According to Reuters, the Senate must achieve a two-thirds majority (67 votes) to pass. The Democrats control only 50 seats out of 100 in the Senate.

As the U.S. government works to pass the agreement, European governments are also pushing for similar legislation. U.S. Treasury Secretary Janet Yellen said the agreement is “a once-in-a-generation accomplishment for economic diplomacy,” praising countries that already joined the arrangement.

  • Darren is an aspiring writer who wishes to share or create stories to the world and bring humanity together as one. A massive Star Wars nerd and history buff, he finds enjoyable, heart-warming or interesting subjects in any written media.