Countries sign breakthrough deal on corporate taxes, fairer tax scheme

By Park Ga-young
  • Published : Oct 10, 2021 - 16:01
  • Updated : Oct 10, 2021 - 17:37

The Organization for Economic Cooperation and Development logo is seen at the 60th OECD Ministerial Council Meeting in Paris on Wednesday. The OECD said Friday that 136 countries had agreed to impose a global minimum tax rate on corporations of 15 percent following years of negotiations on far-reaching reform. “This is a major victory for effective and balanced multilateralism,” said OECD Secretary-General Mathias Cormann in a statement after Ireland, Hungary and Estonia joined the deal, leaving Pakistan, Nigeria, Kenya and Sri Lanka as the only holdouts. (AFP-Yonhap)

A majority of nations struck a groundbreaking deal to enforce a corporate tax rate of 15 percent and share taxes imposed on the profits of multinational companies to where they actually generate profits, the Ministry of Economy and Finance said Saturday.

Some 136 countries and jurisdictions out of 140 involved reached yearslong deals led by the Organization for Economic Cooperation and Development to reform tax schemes that will help countries collect an extra $100 billion in corporate taxes annually from international companies. The 136 countries and jurisdictions represent more than 90 percent of global gross domestic product. Four countries -- Kenya, Nigeria, Pakistan and Sri Lanka -- did not sign on to the agreement.

On Friday, global leaders reached a deal on two major items on the agenda in Paris: to impose a corporate tax rate of at least 15 percent and to give tax rights to the countries where multinational firms operate.

For years, multinational companies have faced criticism for booking their profits in low-tax countries regardless of where they provide services or where the money is earned, intent to slash their bills.

Under the deal, however, companies with global sales above 20 billion euros ($23.1 billion) and profitability of 10 percent will have to pay 25 percent of profits in excess of a profit margin of 10 percent to markets where they have business activities and earn profits.

The deal is expected to have an impact on South Korea‘s leading chipmaker Samsung Electronics, which generated 236.8 trillion won ($198 billion) in revenue in 2020. The new tax deal might be applied to South Korea’s No. 2 chipmaker, SK hynix, depending on its profit margin.

The Finance Ministry said the new global tax scheme is expected to have a limited impact on the competitiveness of Korean firms.

The taxation deal will help the Korean government collect more taxes, as global tech firms such as Google and Facebook will have to pay corporate taxes here once the rules take effect in 2023, the ministry said

The tax deal will be sent to a Group of 20 meeting of finance ministers scheduled for Wednesday for endorsement, and G-20 leaders are expected to approve the deal at their summit in Rome on Oct. 30-31.