The Organization for Economic Cooperation and Development announced Friday a significant breakthrough in corporate tax rates.

The group of developed countries agreed to a minimum global corporate tax rate 15%. This is a significant shift for small economies like the Republic of Ireland which has attracted many international firms via a lower tax rate.

” The landmark agreement, reached by 136 nations and jurisdictions representing more 90 percentage of global GDP, will also reallocate USD 125 trillion of profits from around 100 the largest and most profitable MNEs worldwide to countries around the world, ensuring that these companies pay a fair amount of tax wherever they operate. President Joe Biden stated that the new rule will “finally level the playing field.” “

” For decades, American taxpayers and workers have been paying the price for a tax system which has encouraged multinational corporations to ship jobs and profits abroad. Biden stated that this race to the bottom has not only harmed American workers but also put many of our allies in a competitive disadvantage.

The breakthrough came after some modifications were made to the original text. These included the fact that the 15% rate will not increase in the future and that small businesses won’t be affected by the new rates. This helped Ireland, a long-standing opponent to raising corporate tax rates, to accept the plan.

Hungary was another long-term doubter about a global tax agreement. However, it changed its mind after being assured that the implementation would be lengthy.

Countries will now need to finalize some details to ensure that the new deal can be implemented during 2023. Janet Yellen, Treasury Secretary, stated that the agreement was a “once-in-a generation achievement for economic diplomacy.”

Yellen applauded the many nations who “decided to end the race to the bottom on corporate taxation,” and expressed hope that Congress will use the reconciliation process to quickly put the deal into practice in the U.S.

“International tax policymaking is a complex issue, but the arcane language of today’s agreement belies how simple and sweeping the stakes are: When this deal is enacted, Americans will find the global economy a much easier place to land a job, earn a living, or scale a business,” Yellen’s statement said.

The deal is a significant shift in tax policy. It not only imposes an affordable corporate tax rate but also requires companies to pay taxes wherever they are located, not just their headquarters.

The exact formula to calculate how much companies will owe in each jurisdiction is still being finalized.

The announcement by international leaders was partly due to the coronavirus epidemic, which reaffirmed the need for fair taxation as governments scramble for funding.