OECD: The return on global tax reform is much higher

Additional revenue generated by the global tax reform agreed upon by 135 countries is tens of billions of dollars more than estimated. The Organization for Economic Co-operation and Development (OECD) reports this after its own calculations. The partnership led talks that resulted in a landmark agreement in 2021 to allow countries to benefit more from the profits multinationals reap within their borders.

The fix was necessary because many companies, including digital ones like Facebook or Amazon, are profitable in countries where they are not. In addition, some countries compete with low tax rates to attract businesses. This would hinder poorer countries in particular from collecting tax money.

In 2021, states agreed to, among other things, set a minimum tax rate for corporate profits at 15%. This should stop some countries from trying to entice companies with consistently low taxes. The Organization for Economic Co-operation and Development believes that this reform will generate $220 billion in additional tax revenue annually. The organization previously assumed 150 billion additional benefits to the Treasury, but this amount will be much higher due to the increase in profits.

Another convention is that multinational corporations no longer only pay taxes in their home country, but in countries where the corporation has already made those profits. According to the new calculations, annual profits amount to $200 billion, on which these new taxes can be imposed. In a previous estimate, the OECD still spoke of a profit of US$125 billion.

Especially now that the increased profits of large internet companies can provide additional tax revenue, the organization says, it’s important to speed up reforms. In December, the European Union reached an agreement on the introduction of a minimum corporate income tax rate. These steps are also announced in the budget plans of Canada and the United Kingdom.