The Organization for Economic Cooperation and Development recently announced that the group had agreed to a global corporate tax rate of 15 percent.
“The landmark deal, agreed by 136 countries and jurisdictions representing more than 90 percent of global GDP, will also reallocate more than USD 125 billion of profits from around 100 of the world’s largest and most profitable MNEs to countries worldwide, ensuring that these firms pay a fair share of tax wherever they operate and generate profits,” the OECD said in a statement.
According to NBC News, President Joe Biden commented on the new tax rate saying it would “finally even the playing field.” This comes after leaders added changes to the original text, including that the tax rate will not be increased later, and those small businesses will not get new rates. Further details will need to be adjusted, but the corporate tax rate will go into effect in 2023.
Treasury Secretary Janet Yellen called the agreement “a once-in-a-generation accomplishment for economic diplomacy.” Her statement said, “International tax policymaking is a complex issue, but the arcane language of today’s agreement belies how simple and sweeping the stakes are: 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.”
The deal changes tax policy because it additionally requires companies to pay taxes in the countries they operate in, not only where their headquarters are located. This decision was strongly influenced by the pandemic, which is causing governments to scramble for funding. International leaders are hoping this new global corporate tax rate will allow for fairer taxation.