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OECD reaches deal on corporate tax after Ireland agrees

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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?

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