136 countries agree to a 15% global 'Google tax' on multinationals

OECD announces preliminary international agreement for large companies to pay taxes where they generate revenue

3 min
The OECD postpones the Google tax until the middle of 2021

ParisAfter years of negotiations, 136 countries around the world - including Ireland, the United States, China and India - agreed on Friday to implement a global Google tax that will apply to all multinationals. There are still details to be finalised, but the principle of agreement is firm: a global minimum corporate tax of 15% is being pushed through. When the new global tax framework is implemented, all companies with a turnover of more than 750 million euros per year - not just tech giants like Google, Amazon, or Facebook - will have to pay this 15% in the countries where they generate revenue. The measure seeks to put an end to schemes used by multinationals to pay less tax by shifting profits to countries with very low taxation.

"The global minimum tax is not intended to eliminate tax competition, but sets multilaterally agreed limitations", says the Organization for Economic Cooperation and Development (OECD) in a statement released on Friday. The international body estimates that when the tax is implemented, countries will collect about 150,000 million dollars (130,000 million euros) in additional revenue from large corporations annually.

The initiative, negotiated under the umbrella of the OECD, but with the participation of most of the world's countries - representing 90% of global GDP - will have to be ratified first by G20 finance ministers next week in Washington and then by world leaders at the G20 summit in Rome at the end of the month. If there are no delays, the regulation would be finalised in 2023 so that implementation can begin. OECD Secretary-General Mathias Cormann said the agreement will make international tax rules "fairer". "It is a great victory for an effective and balanced multilateralism", he said.

Ireland gives in

In July, the foundations for a global consensus were laid and now it seems that the initiative is finally going ahead. In the last few hours there had been movements that advanced the historic agreement: Ireland - one of the countries that is a haven for large companies due to its low tax policy and one of the most reluctant to accept the initiative - announced on Thursday that it was joining the initiative. The other two European countries that had remained on the sidelines, Estonia and Hungary, have also decided to sign up to the agreement. According to OECD sources, India has tried to withdraw from the agreement, but has finally rectified its position. It would have been a major setback if one of the world's leading emerging economies had been left out of this global initiative.

Faced with the impossibility of reaching a consensus among the 140 countries, the 136 countries that are signatories to the agreement are willing to push for changes to international tax rules without waiting for the rest. "The agreement will be finalised in the coming weeks, and foreign-based multinational corporations will face a minimum tax in all countries where they do business, just as U.S.-based multinationals do now", U.S. Treasury Secretary Janet Yellen has stressed. According to Yellen, the lack of such tax legislation "has deprived our nations of important resources and increased the tax burden on workers".

The change of tenant in the White House has been key to give a push to an initiative that had been under negotiation for more than seven years. While Donald Trump was at the head of the US administration, the United States had slowed down the agreement and had even threatened European countries that applied a tax on multinationals with a trade war. In the final stage, Trump was more flexible, but no progress was made in the talks either. The arrival of Joe Biden has been an important revulsive. Without the go-ahead of the most powerful country in the world, the tax would probably still be stuck.

While awaiting international agreement, countries like Spain and France have already launched their own Google tax, in this case focused on technology multinationals. In addition, the Spanish government has included in the 2022 general budget a minimum corporate tax rate of 15% for large companies.