The Organization for Economic Cooperation and Development (OECD) announced this Monday changes in the determination and operation of the minimum tax on multinationals that will exempt American companies from the tax, as Washington had demanded. The Donald Trump Administration diametrically opposed the tax, which was initially supported by his predecessor Joe Biden, although the US Congress never ratified it. The New York magnate, who returned last year to take the reins of the Oval Office, alleged that it was discriminatory against North American firms and threatened to impose retaliatory taxes on countries that taxed American corporations under the framework agreed upon in the OECD.
The roadmap had already been set since last summer, when the G-7 group, which brings together the seven largest economies in the world, agreed to exempt US multinationals from the 15% minimum tax to large corporations agreed in 2021 internationally. This Monday, the exemption has been confirmed in an agreement signed by the more than 145 countries and jurisdictions that work in the so-called OECD-G20 Inclusive Framework —formed in 2016 to stop corporate tax avoidance—.
The agreement recognizes an exemption from the tax to countries that meet certain criteria, a list on which today only the United States appears. In practice, it is accepted that the 15% minimum tax is not applied to American multinationals since Washington already has a system to tax the profits that its corporations obtain abroad, a type of national minimum tax calculated according to rules different from the international ones that the Trump Administration – which launched it during its first term – claimed as an alternative to the one agreed at the international level.
“A kind of tailor-made suit has been made for the United States,” contextualizes Félix Martínez, professor of Financial and Tax Law at the Autonomous University of Madrid (UAM). “Pillar two [como se conoce en jerga el impuesto mínimo del 15% a las multinacionales] It was already closed, but one obstacle remained: the United States rejected it because it has its own system. Now it is given a competitive advantage, because US multinationals will not have to meet all the criteria required of those from other countries that apply pillar two.”
The minimum tax was agreed in 2021 between more than 130 countrieswith the aim of stopping tax avoidance by the largest multinationals—those with a turnover of more than 750 million euros—and limiting downward competition in corporate taxes between countries. The agreement was then received as historic, since such a broad consensus had never been reached at the international level on such a complex and delicate matter, over which States have full sovereignty.
The United States, headquarters of the world’s main multinationals, became increasingly resistant to the agreement, until reaching a total break after Trump’s electoral victory. The EU, on the other hand, has already set out the minimum tax in a directive that the Member States they have had to transfer in their national legislation, and that after the latest changes is outdated.
“Historic decision”
The multilateral institution has presented the change as a “significant political and technical agreement that will lay the foundation for stability and certainty in the international tax system.” “This Inclusive Framework agreement, which includes more than 145 countries, constitutes a historic decision in international tax cooperation,” said the Secretary General of the OECD, Mathias Cormann, in a statement released by the institution.
The OECD has stressed that the consensus has been reached “after months of intense negotiations”, and that the review carried out establishes “the key elements of a package that marks the way forward for the coordinated operation of global minimum tax agreements in the context of a digitalized and globalized economy.”
This package is made up of five technical components, as detailed by the organization itself, which has added that in the coming weeks it will make more information available and hold an online seminar to facilitate its implementation. The first of them has to do with a simplification of the burdens to calculate and present reports related to the minimum tax, both for multinationals and tax authorities.
In addition, the agreement harmonizes the treatment of corporate tax incentives worldwide and introduces new safeguards for multinational groups whose parent entity “is located in an eligible jurisdiction that meets the minimum tax requirements,” just the element that opens the door for companies with headquarters in the United States to avoid the tax.
“Now pillar two is lame, because one of its objectives was to have common rules to achieve that minimum taxation, and it draws multilateralism at two levels: the rest of the world and the United States,” Martínez concludes.
