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The world’s largest economies agreed on major changes to the global tax system on Thursday, despite staunch opposition from low-tax regimes such as Barbados, Ireland and Hungary.
According to four representatives at the talks, around 130 countries have signed up to the agreement, which aims to introduce a global tax for the 100 largest companies in the world and to set an international effective minimum corporate tax rate of 15 percent. Nine countries, which mostly offer low corporate tax systems, opposed setting the minimum rate, added those speaking on condition of anonymity.
All G20 countries, including the US, China and France, have backed the deal, and their finance ministers are expected to adopt the deal on July 9th. Many details of the agreement, such as possible exemptions for the financial and manufacturing sectors, have also been removed from the current pact and will now be worked out through October.
The global proposal – which aims to prevent Google, Amazon and other corporate giants from hiding their global profits in low-tax regimes or tax havens – became bitter on Thursday in last-minute negotiations led by the Organization for Economic Co-operation and Organization for Economic Co-operation divided development.
A handful of countries refused to join a global minimum tax ceiling because they feared that such proposals would undermine their ability to lure international companies to their shores and pose a direct threat to their national sovereignty. Other opposing countries include Estonia, Kenya, Nigeria, Peru, Sri Lanka, St. Vincent and the Grenadines and Barbados, one of the officials said.
However, with the support of the world’s largest economies – including the UK, Germany and India – these low-tax regimes are now in a battle of retreat to maintain their domestic tax rates, while officials in other countries are threatening to introduce the new tax regimes, worldwide, no matter what the regimes Resist do next.
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