A landmark agreement has been reached on the taxation of tech companies, but there is a small problem

By RockedBuzz 2 Min Read

Manal Corwinthe director responsible for taxation of the international economic organization, said that this is another important step in the practical implementation of the agreement reached in October 2021.

If enough countries sign and ratify the treaty, it could result in a redistribution of profits worth 200 billion a year, which would go to the countries where the sales actually took place.

In the ongoing negotiations at the OECD 143 countries participated.

The current international rules were developed in the 1920s, but are now outdated. These are the rules they do not give countries the legal option to tax digital businesses operating within their borders but without a physical presence.

In principle, the changes apply to multinational companies with revenues of more than 20 billion euros and a profit margin of more than 10 percent. In the case of these companies, 25 percent of their profit exceeding the 10 percent margin would be taxed in the countries where they have sales.

The OECD estimates that reallocation will generate between $17 billion and $32 billion in global tax revenue, with low- and middle-income countries benefiting the most.

But the question is how many countries’ governments will accept the agreement.

According to Corwin, despite the fact that the negotiators unanimously agreed to release the text of the treaty, there are still differences of opinion among some countries. Among others, Brazil, Colombia and India also expressed reservations about the details.

For it to enter into force, 30 countries that are home to at least 60 percent of the multinational companies involved must ratify the treaty, which means the United States must also be among the signatories

– writes a Reuters.

Most of these tech giants are in the United States, including Google, Amazon, Meta and Apple.

Cover image source: Getty Images

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