Bulgaria has joined the most important tax reform in the world for 100 years – World

Bulgaria joined the group of 130 countries, which supported a reform of the way in which the activities of transnational corporations are taxed. Companies will be taxed in a new way – including paying in the country where they make their sales – and the corporate tax will be at least 15%, which will bring governments around the world an additional $ 150 billion a year.

The details must be specified by October, and the change must be a reality by 2023.

The G7 leaders agreed on this in June, and now the agreement will go for political approval next week at the G20 summit in Venice.

The news for the world’s biggest tax reform in decades, and maybe a century, was circulated by the Organization for Economic Co-operation and Development (OECD) after two days of negotiations, part of a nearly 10-year process. Nine countries, including Ireland, Hungary and Estonia, have refused to join. French Finance Minister Bruno Le Mer said he would try to persuade them to join.

The caretaker government must explain how the tax regime in the country will change, as the corporate tax is currently 10%, one of the most attractive in Europe. It also needs ratification by the National Assembly, as well as in foreign parliaments such as the Congress in Washington, where the battle will be very tough.

• For now, it is known that the new minimum threshold of 15% will be paid by corporations with a turnover of at least $ 750 million, and that the shipping business, mining and financial services sectors will be excluded from the agreement. In practice, this will affect companies with a global turnover of over 20 billion euros and a 10% profit margin before tax. It is possible that after 7 years there will be a revision of the rules and the threshold will be reduced to a turnover of 10 billion euros. To win over catching economies such as China, India and some in Eastern Europe, it has been agreed that the new rules will not apply to investment in equipment and manufacturing plants.

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President Joe Biden’s administration gave a decisive boost to the talks, but it was commented that in the United States this seemed an acceptable compromise because the president was ready to raise the corporate tax to 25%.

Obviously, for countries representing more than 90% of global GDP, the solution is acceptable because it attempts to adapt to the realities of the digital economy, in which companies earn in one country but pay where they are registered, and where corporate tax can to be many times lower.

“With the minimum global tax deal, multinational corporations will no longer be able to pit one country against another in an attempt to lower their taxes,” Biden said. “They will no longer be able to avoid paying what is due by hiding in low-tax jurisdictions profits made in the United States or in another country’s market.” According to the Financial Times, it was American lobbying that persuaded many countries to join.

Matthias Corman, the new OECD Secretary-General, said countries would still be able to cut taxes to attract investment, and that the rules were not drafted to impose a uniform corporate tax regime worldwide.

The new regime is likely to affect not only technology giants and online retailers in the first place, but also luxury goods providers and pharmaceutical companies. Countries that have already introduced taxation on digital companies will have to give up such a national tax before joining the new world regime.

Ireland, which chairs a group of eurozone finance ministers, said it supported the tax-paying agreement where profits were made, but wanted small countries to be able to use competitively low tax rates to attract investment and create jobs. and compensation against the advantages provided by the major countries.

Critics of such a position say that such low-tax countries attract a disproportionate amount of foreign investment. In Ireland, for example, multinational companies employ one in eight employees.

Another thing Dublin insists on is allowing corporations to ease part of their tax payments through investment in research and development – something important to Ireland.

The other countries that have spoken out are Barbados, Kenya, Nigeria, Sri Lanka and Saint Vincent and the Grenadines. Peru is refraining because there is still no government in Lima to make a decision.
Details coming later at www.dnevnik.bg.

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