OECD tax deal falls well behind schedule

The OECD has admitted that its groundbreaking international tax deal to increase the amount paid by multinationals is falling significantly behind schedule and has no hope of being implemented before the US Congressional elections in November.

Speaking at the World Economic Forum in Davos, Mathias Cormann, the OECD secretary-general, said there were “difficult discussions under way” and that, instead of the deal being implemented in next year, it would come into force at the earliest in 2024.

Since being signed in October, the deal has come under fire in the US from Republicans in Congress, and European unanimity on the subject has also frayed.

The first pillar of the deal was designed to force multinationals to pay more tax where they make their sales, overturning 100 years of corporate tax rules. This requires an international treaty to come into force.

But Cormann admitted that, instead of the full text of the deal being ready by the middle of this year, “that is now more likely to be by the end of this year”.

And instead of implementation in 2023, he said under the most optimistic scenarios countries would not make the necessary tax treaty changes until 2024 at the earliest.

“We deliberately set a very optimistic timeline for implementation to keep the pressure on and it has helped keep the momentum going. But I suspect it is probably most likely that we will end up with a practical implementation from 2024 onwards,” Cormann said.

The OECD secretary-general was more optimistic on the chances of the second pillar of the deal coming into force. That sets a minimum effective corporate tax rate of 15 per cent, with countries able to tax profits of their companies made abroad if those jurisdictions do not impose the minimum tax.

Poland is holding up an EU directive on this part of the deal. Bruno Le Maire, French finance minister, on Tuesday indicated that there would be no deal on that today, hoping that Poland’s concerns could be addressed next month.

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