A global corporate tax rate of at least 15% was agreed upon by 130 countries, the Organisation for Economic Co-operation and Development (OECD) said on Thursday.
But Hungary and Ireland were part of a small group of countries that did not agree on the tax rate on multinationals.
The Irish government expressed its “broad support” for the agreement but noted its “reservation about the proposal for a global minimum effective tax rate of ‘at least 15%’.”
“As a result of this reservation, Ireland is not in a position to join the consensus,” the Irish finance ministry said in a statement.
Mathias Cormann, the OECD Secretary-General, nonetheless hailed a historic package of measures.
“After years of intense work and negotiations, this historic package will ensure that large multinational companies pay their fair share of tax everywhere,” Cormann said.
“This package does not eliminate tax competition, as it should not, but it does set multilaterally agreed limitations on it.”
The countries also agreed on a fairer distribution of “profits and taxing rights” with respect to multinationals including digital giants such as Amazon and Google.
“It would re-allocate some taxing rights over multinationals from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there,” the OECD said in a statement.
US treasury secretary Janet Yellen said it was a “historic day for economic diplomacy”.
“Lower tax rates have not only failed to attract new business, they’ve also deprived countries of funding for important investments like infrastructure, education, & efforts to combat the pandemic,” Yellen tweeted.
“Today’s agreement by 130 countries representing more than 90% of global GDP is a clear sign: the race to the bottom is one step closer to coming to an end,” she added.
French finance minister Bruno Le Maire tweeted: “more than 130 countries, including China, India and Russia have agreed to international taxation at the OECD. It is a historic, ambitious and innovative agreement, unheard of for a century.”
But some said the agreement favoured rich countries over developing ones.
“Not only does the agreement still leave loopholes for multinationals to practice tax evasion, it will also accentuate the inequalities between rich and poor countries,” said Quentin Parrinello, spokesperson for the NGO Oxfam France.
“A fair agreement would have allowed a better redistribution of the rights to be taxed. But 60% of the minimum tax revenue will be reaped by G7 countries. Developing countries, which represent more than a third of the world’s population, are expected to receive only 3% of the revenue,” Parrinello added in a statement.