The new OECD treaty is a breakthrough for fair taxing

Foto van Maarten de Wilde

On 8 October 2021, 136 countries signed a new tax deal on the taxation of big companies. The Organisation for Economic Cooperation and Development (OECD) led the negotiations. Maarten de Wilde, Professor of International Tax Law at Erasmus School of Law, speaks of a breakthrough and explains the agreement's impact at NU.nl.  

The agreement will result in higher taxes for big companies. A minimum tax fare of fifteen per cent will be applied for companies with a turnover of 750 million euros or more. Also, other countries will be allowed to collect the rest of the fifteen per cent of taxes a multinational does not pay in another country. De Wilde is optimistic about an agreement: “It is a great improvement that international agreements have been made. Until now, countries always decided on the amount of profit tax independently. For that reason alone, these agreements are a breakthrough." 

 

The success of this new legislation merely depends on how the plans are worked out in detail. If there are any loopholes in the law, countries and companies may take advantage of them, undermining the effectiveness of the agreement. Countries could also find difficulty finding out to which extent a company has paid some tax in another country. There is a possibility that countries that have not signed the agreement, or that withdraw from it at any time, will not be happy to exchange this information or will not support each other in any other administrative way. 

 

With the agreement, multinationals will be taxed more severely. It would be an annual additional tax revenue of 150 billion dollars. De Wilde emphasizes that this agreement is intended to tax large multinationals more heavily and give countries less freedom of movement through taxes to compete for investments. The measures are not specifically aimed at combating letterbox companies. Measures against this have been and will be taken in other ways.  

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