85% of multinationals will be exempted from such tax. The question then is, who will pay for it?

A meeting of finance ministers of the G-20 took place last July in Venice. From that meeting the world saw the emergence of the so-called “basic political agreement” that has now been finalized within the framework of the OECD.

Among those who participated in the meeting was the United States’  Secretary of the Treasury, Janet Yellen, who gave her blessing in representation of the Biden Administration, to move forward in a new “global taxation” scheme, that allegedly would help finance all kinds of social programs to attempt to take the global economy  back to growth and development.

The document redacted after the meeting was labeled as a “historic agreement” among 136 countries to set a minimum corporate tax of 15% applicable to large companies, whose income was higher than 750 million euros a year.

The consensus reached in the meeting also also established a “more equitable distribution” between countries of the taxes levied on digital giants such as Google, Apple or Facebook.

The European Union joined countries such as Ireland, Estonia and Hungary in support of this agreement.

Several traditional tax havens are on the list of 136 countries and jurisdictions that have signed the agreement, including the Cayman Islands, the Bahamas, San Marino, Monaco and Andorra.

The step taken towards the “harmonization of international taxation” is regarded as the greatest advance in the matter for at least a century. The technically complex agreement, with some exceptions for the countries that most resisted accepting it -such as Hungary-, supposes a way to mitigate tax incentive competition which is seen as the cause of tax evasion, which supporters of this agreement assign blame for the lack more significant tax revenue for their governments.

Unfortunately, it is just another corporate fraud scheme

While the qualifiers of “historic” and “unprecedented” multiply to celebrate the agreement reached last Friday within the OECD to set a global tax burden on large companies, the day after the agreement was signed, the small print appeared to relativize the pact.

One of the most significant results has been the establishment of a minimum corporate tax rate of 15%. However, while it is true that companies representing 90% of world revenues will be subject to it, it is also true that between 80% and 90% of multinationals will not pay it such a tax. In effect, the tax is charged to those companies that have a turnover of more than 750 million euros. With this threshold, the bulk of multinationals are outside the norm.

The fraudulent nature of the pact was recognized by the OECD itself in one of the preparatory texts for the regulation. The agency, which hopes to increase collection of taxes by 130 billion euros, does not see it as a big problem, because it considers that it is important that the real business giants pay more, despite the fact that their number in absolute terms is small.

Another unknown about this tax is the so-called “grace period” or “transition” for the full application of the tax, a period of time that can range, depending on deductions and exceptions, up to ten years.

Several NGOs also criticize that this tax ends up filling the public coffers of the richest countries, which is where 60% of the large corporations are based. Other NGOs that support stealing wealth from those who produce it regret that 15% is too low a minimum rate to discourage tax avoidance and far from the average level corporate tax of 23%.

Regarding the so-called “pillar 1”, which will be applied to companies with a business volume greater than 20 billion euros and with a profitability of at least 10%, mandates that companies redistribute between 20% and 30% of these extra benefits to countries where they effectively sell their goods or services. Although loaded with good intentions, the mechanism also creates distortions.

According to Oxfam, some large but “unprofitable” firms such as Amazon would be left out of this norm, while those corporations that would be included in this rule would not even amount to 100 in total. Money from redistribution, according to the assigned scales, would be scarce, especially in developing countries where, in addition, they are forced to waive their own taxes on technology.

“I have been following the issue for eight years and I would like to call this agreement historic, but its implementation is very weak and in some cases it even harms the least developed countries,” says Susana Ruiz, from Oxfam.

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