The OECD published on Wednesday a draft agreement aimed at distributing tax revenues from the profits of large multinationals, and in particular digital giants, more equitably between States.
This multilateral convention is not yet open for signature by States, certain countries including India, Brazil and Colombia still having reservations on certain points.
There is a very broad consensus on the general architecture of the text among the approximately 140 states participating in the negotiations, Manal Corwin, director of the OECD center for tax policy and administration, told the press. The goal is still for the agreement to be signed by the end of 2023, she said.
Since 2017, the Organization for Economic Co-operation and Development (OECD), mandated by the G20, has coordinated international negotiations aimed at limiting the tax evasion practices of multinationals and establishing a system of more equitable distribution of tax revenues derived from their profits.
The multilateral convention published on Wednesday provides that part of the tax revenue on the profits of very large multinationals will be reallocated to the countries in which their clients are located, regardless of the State in which they have chosen to establish their headquarters and be imposed.
Currently, companies – particularly digital giants – can choose to be taxed in countries with favorable taxation where they nevertheless only carry out a reduced part of their activity, fueling tax competition between States.
These new rules will only apply to the largest multinationals, those whose global turnover exceeds 20 billion euros and whose profitability is greater than 10%. Which represents around a hundred companies worldwide.
If the new system is adopted, 25% of their profits exceeding a margin of 10% of their turnover – known as residual profits – will be reallocated to the countries in which they were made.
The sums collected will be distributed proportionally between the countries in which the multinational has achieved at least one million euros in turnover (a threshold lowered to 250,000 euros for states whose GDP is less than 40 billion euros).
In total, some 200 billion dollars should be redistributed each year, according to calculations by the OECD, which predicts that the reform will generate 17 to 32 billion dollars in additional tax revenue.
In return, the multilateral convention eliminates double taxation and the signatory countries which have implemented specific taxes on multinationals, such as the tax on digital services nicknamed Gafa tax in France, undertake to remove them.
But the road is still long. The convention must be signed by the States, then ratified by their parliaments.
To come into force, it must have been adopted by at least 30 countries where at least 60% of the multinationals concerned are located.
The United States, which is home to almost half of them, represents a major uncertainty. President Joe Biden currently does not have a sufficient majority in Congress to ratify the text.
If the convention does not enter into force, there is a risk of a proliferation of unilateral measures and taxes on digital services, which would threaten the stability of the international tax system, Ms Corwin warned.