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OECD reaches deal on corporate tax after Ireland agrees

US Secretary Of State Antony Blinken (frontL), talks past OECD Director for Council and Executive Committee Secretariat(SGE/CES), Silvia Da Rin Pagnetto, (frontR), during a closing session at Organisation for Economic Cooperation and Development’s Ministerial Council Meeting. It was held in Paris, October 6th 2021.

Patrick Semansky | AFP | Getty Images

Friday’s announcement by the Organisation for Economic Cooperation and Development, following years of dispute over corporate tax rates was a huge breakthrough.

Group of industrialized nations agreed on a global minimum corporate tax rate of 15%. This marks a huge shift for smaller economies, such as the Republic of Ireland, which have attracted international firms — to a large extent — via a lower tax rate.

In a Friday statement, the OECD stated that “The historic deal was agreed by 136 nations and jurisdictions representing more then 90% of global GDP.”

This breakthrough came after some minor changes to the original text. These included the fact that 15% of the rates will not rise in the future and that no small business will be subject to these new rates.

This worked. Ireland — a long-time opponent of raising corporate tax rates — to get on board with the plan.

Hungary, which was a long-time skeptic of a global tax arrangement, has also decided to change its mind, after being assured there would be a prolonged implementation period.

The new agreement will be effective in 2023, but countries must now work out the details.

What are the terms of the agreement?

Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.