What's happened
Nearly 150 countries have agreed on a plan to curb profit shifting by large multinationals, but the US is exempt from the 15% minimum tax. The deal aims to prevent tax havens, but critics say it allows US firms to continue parking profits offshore. The deal is a significant shift in international tax cooperation.
What's behind the headline?
The recent OECD deal marks a significant step in international tax cooperation, but the US exemption reveals underlying geopolitical tensions. The deal's core aim was to establish a minimum global corporate tax to prevent a race to the bottom, but the US negotiated an exemption for its largest firms, notably Apple and Nike. This move benefits US multinationals by allowing them to continue parking profits in tax havens, undermining the deal's effectiveness. The exemption also signals a broader US reluctance to cede sovereignty over tax policy, especially amid domestic political debates. Critics argue this weakens global efforts to ensure fair taxation, risking a return to tax competition. The deal's success will depend on whether other countries enforce the minimum tax and how US firms leverage their exemptions. The deal's future impact hinges on international cooperation and US policy choices, which will shape global tax fairness and revenue collection for years to come.
What the papers say
The Guardian reports that nearly 150 countries have agreed on the plan, highlighting the broad international support for curbing profit shifting, but notes the US exemption has drawn criticism from tax transparency groups like the FACT Coalition. AP News emphasizes the US's strategic exemption, framing it as a victory for US sovereignty, while also acknowledging the deal's dilution from the 2021 original. The Independent provides context on the negotiations, noting the political tensions that led to the exemption, and highlights the criticism from tax watchdogs who warn that the exemption allows US firms to continue exploiting tax havens. All sources agree that the deal represents a major shift in international tax policy, but the US exemption remains a contentious point that could undermine its global effectiveness.
How we got here
The agreement stems from a 2021 OECD initiative to address tax avoidance by multinational corporations. It was designed to set a 15% global minimum tax to stop companies from shifting profits to low-tax jurisdictions like Bermuda and the Cayman Islands. The US initially supported the plan but negotiated exemptions for its large firms, leading to a watered-down version. The deal reflects ongoing tensions between global tax cooperation and national sovereignty, especially in the US, where political debates have influenced the negotiations. Critics argue the exemption undermines the original goal of curbing tax competition and profit shifting.
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