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OECD upbeat on global minimum tax rate

OECD Secretary-General Mathias Cormann has told an international tax forum in Sydney that momentum is building for a global corporate tax floor.

OECD Secretary-General Mathias Cormann has told an international tax forum in Sydney that momentum is building for a global corporate tax floor. Photo: AAP

OECD Secretary-General Mathias Cormann says he is “quietly optimistic” that a global minimum corporate tax rate will be implemented by 2024.

Mr Cormann was in Sydney on Friday to close the OECD’s Forum on Tax Administration (FTA) Plenary, which this week hosted officials from around the world focusing on how to boost international tax cooperation.

A key issue is implementing an OECD-brokered deal to rewrite cross-border taxation rules to deal with challenges from the digitisation of the economy, including tax avoidance by large multinationals.

The “pillar one” portion of the deal would replace unilateral taxes on digital services with a new mechanism enabling multinationals to be taxed in part based on where they sell products and services, rather than where they situate their headquarters and intellectual property.

Under the plan’s second pillar, a floor rate would be put under corporate income tax via a minimum global corporate tax rate of 15 per cent, with the aim for countries to use it to protect their tax bases.

The former Australian finance minister, in closing remarks, said once a “critical mass” of countries legislated the global minimum it would very quickly become “self-perpetuating”.

“As It will not be in any country’s interest to leave money on the table for other jurisdictions to collect at their expense,” he said.

“That is why we are quietly optimistic that the momentum is there to ensure that pillar two of this historic agreement will be implemented in time for 2024.”

Mr Cormann, previously a West Australian senator who worked under three Liberal prime ministers before becoming the new OECD chief in 2021, also pointed to the “sobering backdrop” of war in Ukraine.

He said the “war of aggression” was most sad for the Ukrainian people, while noting its impact on the global economy, energy markets and energy transition.

“It’s a sobering backdrop but one that should make us even more determined to forge a better future based on increased and ever improving international cooperation,” he told the forum.

Earlier this week, the OECD warned global economic growth is slowing more than was forecast a few months ago in the wake of Russia’s invasion of Ukraine, flagging higher recession risks in major economies.

– AAP

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