President Joe Biden’s proposals to prevent multinationals from shifting their profits to tax havens are a “once in a lifetime” chance to end tax abuse and could be signed within months, said the head of the United Nations. economic cooperation and development.
Ángel Gurría, who coordinates international negotiations on Biden’s plan as OECD secretary-general, said a deal was within reach and could be signed this summer after decades of limited progress. This follows a change by the White House to call the time a “race to the bottom” among nations undercutting tax rates to attract businesses to locate within their borders.
Writing in the Guardian before leaving the Paris-based institution next month, Gurría said: “This is a unique opportunity to achieve a complete overhaul of the international tax system, both to provide more tax certainty for businesses. . like making sure everyone pays their fair share of taxes.
“The new American momentum is exactly what was needed to bring this negotiation to a successful conclusion by mid-2021.”
Sounding the alarm on the risks to a fragile global economy as several countries ease Covid-19 restrictions after the worst recession of 2020 since the Great Depression, the head of the OECD, the club of 37 members from rich countries, said the Biden plan proposed a loophole from years of deadlock on international tax reform.
Failure to complete the deal, which is being debated in negotiations between 135 countries, would risk tipping the world into a new era of economic conflict over trade, he said.
“Today we are at a crossroads: moving forward with more efforts in tax cooperation, or facing the risk that countries take unilateral action. This would not only lead to increased fiscal uncertainty, but could spark a tax-driven trade war – the last thing a global economy ravaged by the Covid pandemic needs. “
Biden’s administration earlier this month announced plans for sweeping reforms to the global tax system, with proposals to limit the ability of multinational companies to locate profits in low-tax jurisdictions and agree of a global minimum tax rate.
Washington had long resisted calls for global treaties that reformers argued were necessary to ensure that powerful multinationals pay their fair share of taxes.
Biden announced more details of his reform agenda on Wednesday in his first major speech to both houses of Congress. The White House has confirmed its intention to inject $ 1.8 billion into the world’s largest economy to support ordinary Americans, as part of a national pandemic recovery program, which will be funded by a certain number of tax increases for large companies and high net worth individuals.
According to Biden’s proposals, big tech companies and corporations would be required to pay taxes to national governments based on the sales they generate in each country, regardless of where they live. A global tax floor would also be agreed. The United States has suggested a rate of 21%, although it is higher than in several jurisdictions – including Ireland, Hungary and the Caribbean – and could be a stumbling block.
G20 finance ministers agreed to move forward towards a global deal, working with the OECD, hoping for a deal in time for a July summit.
Gurría’s comments come after 15 years at the helm of the OECD. He will resign at the end of May, replaced by former Australian finance minister Mathias Cormann despite serious concerns expressed by environmental groups about his record on climate change.
“As the end of my term as Secretary General approaches, I hope that we will learn the lessons of the previous crisis to move forward better. The conclusion of a global tax deal in 2021 would be the culmination of many years of hard work and would mark a new era for better regulation of globalization, ”said Gurría.