Agreed on Minimum Corporate Tax Rate of 15%, but Tax Haven Ireland Excluded

Agreement Among 130 Countries Worldwide... Impact of Tax Avoidance Controversies on Google and Facebook
Amazon Also Included in Taxation... Estimated Additional Annual Revenue of 170 Trillion Won
Legislation Hindered by US Republican Opposition... Unresolved Issue of Tax Haven Countries

[Photo by Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] On the 1st (local time), 130 countries accounting for 90% of the world's total production (GDP) agreed to set a minimum corporate tax rate of 15%, with global IT giants such as Amazon, Google, and Facebook, which have been embroiled in tax avoidance controversies, expected to be the most affected.

However, some tax haven countries opposed this agreement, leaving loopholes. Difficulties are also anticipated in the legislative processes of each country to change their tax systems. In the United States, opposition voices, mainly from the Republican Party, are already strong.

On this day, The New York Times (NYT) reported that the minimum corporate tax rate proposal, which the U.S. proposed and reached an agreement on, aims to tax big tech companies like Amazon and Facebook. The Organisation for Economic Co-operation and Development (OECD) estimated that it could collect an additional $150 billion (approximately 170 trillion KRW) annually in tax revenue.

The OECD stated that detailed discussions are necessary regarding the specific tax implementation measures. In this regard, the NYT reported that through detailed discussions, it will be decided which big tech companies will be included, and financial companies and oil and gas companies will be excluded from the tax targets.

Amazon, which was controversial for having an operating profit margin below 10%, will also be included in the tax targets. Bruno Le Maire, France’s Minister of Finance, said regarding Amazon, "It will be included in the tax targets through detailed plans."

President Joe Biden, who advocated for the introduction of a global minimum corporate tax, immediately sent a message of welcome. In a statement released that day, President Biden said, "This is an important step toward a fairer global economy," and welcomed the move, saying, "It will help workers and middle-class families around the world, including in the United States."

However, there are many voices opposing this decision within the United States, so difficulties are expected in the legislative process.

Republican Representative Kevin Brady, a member of the U.S. House Ways and Means Committee, criticized, "This agreement is a proposal to send American jobs overseas," calling it a "dangerous economic surrender." If the Republican Party opposes, there is a possibility that the ruling Democratic Party may pass it alone, but in this case, a debate is expected over whether the minimum corporate tax rate is an international treaty. According to the U.S. Constitution, international treaties require a two-thirds majority in the Senate. Since the Republican Party holds half of the Senate seats, if recognized as an international treaty, the bill’s passage becomes uncertain.

The NYT also pointed out that tax havens in Ireland and the Caribbean are variables as they do not agree. Among the nine countries that did not agree to the proposal, three EU member countries?Ireland, Hungary, and Estonia?were included. Donohoe Paschal, Ireland’s Minister of Finance, expressed a reserved stance on the 15% rate after the proposal was made public. Ireland’s corporate tax rate is 12.5%, the lowest among Western European countries. Ireland’s position is that small countries should be given benefits to maintain competitiveness against larger countries. Minister Paschal said, "The 12.5% corporate tax rate has been one of the reasons Ireland has maintained its competitiveness," and added, "We will continue to assert the legitimacy of the 12.5% corporate tax rate."

The agreement is expected to be approved at the G20 Finance Ministers meeting to be held next week in Vienna, Italy. The OECD announced that it plans to prepare detailed implementation measures by October this year and implement them starting in 2023.

This content was produced with the assistance of AI translation services.