Global minimum tax spurned by 9 countries, complicating new deal

While the 139 countries negotiating a global minimum tax overwhelmingly signaled support for a 15% deal, there were nine holdouts, among them SVG.

Treasury Secretary Janet Yellen announced that 130 of the 139 countries involved in the Organization for Economic Cooperation and Development talks had agreed to the plan.

The nine who didn’t sign on were St. Vincent and the Grenadines, Barbados, Estonia, Hungary, Ireland, Kenya, Nigeria, Sri Lanka, and Peru.

The three holdouts that are the most significant are Hungary, Estonia, and Ireland, because in order for the deal to work, the European Union needs to agree unanimously to the new rules and pass a law to do so.

St. Onge said that while the relationships between larger EU countries and Ireland and Estonia are good, the relationship between Hungary and countries such as France and Germany is a bit strained because of Hungary’s domestic politics. However, St. Onge said that if he had to guess, the EU will eventually find a way to “bribe” Hungary and bring it over to supporting the tax agreement.

While logic would assume that the few holdouts (for example, St. Vincent and the Grenadines) might benefit and attract businesses by being one of the few places not under the 15% regime, St. Onge explained that the OECD can be incredibly coercive and “absolutely hunt” jurisdictions where they don’t like the tax rate.

“They have a lot of points of leverage if the other 90% of governments are on board,” he said.

The minimum global corporate tax rate is intended to eradicate certain tax havens that allow multinational companies to shield their profit, while giving smaller countries more tax revenue from bigger firms.

Yellen has said a global tax, which would apply to companies’ overseas profits, would eliminate what she’s described as a “global race to the bottom” in terms of corporate taxes.