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October 18, 2021

136 Countries Agree To Pursue Global Minimum Tax

On Monday, October 11, the Organization for Economic Cooperation and Development (OECD) announced that 136 countries, including the United States, Canada, China, and countries in the European Union, had agreed to a framework for a global minimum tax on multinational corporations. Ireland and Hungry were among the holdouts that endorsed the pact.

Specifically, the plan would impose a 15 percent minimum corporate tax rate on companies that have more than $125 million in annual profits and have a global effective tax rate of less than 15 percent. Home countries would impose a top-up provision to increase the tax companies pay if their rate is lower than 15 percent. If approved, the OECD estimates the new tax system will bring in an additional $150 billion annually for participating governments.

According to the U.S. Chamber of Commerce, “A global minimum tax is problematic for U.S. businesses because it would result in tax increases for them, which will force them to reduce investment. Less investment leads to fewer jobs and lower wages for American workers.” Read more from the USCC here.

Leaders of G-20 still have to approve the agreement, but that step is expected to be little more than a formality. What will really matter is how U.S. and Canadian lawmakers handle the issue since both Parliament and Congress will have to pass legislation to implement the framework in their respective jurisdictions. U.S. Treasury Secretary Janet Yellen said she is “confident” Congress’ current $3.5 trillion reconciliation package will include a 15 percent global minimum tax on corporate profits, but that remains to be seen.

Stay tuned to Connecting the Dots as this story develops.

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