LONDON—One-hundred thirty-six countries agreed to a global treaty that would instate a minimum 15% tax rate for multinational corporations and require companies to pay taxes in the countries where they do business, reports CNN. The number of countries who signed represents over 90% of the global gross domestic product.
"Today's agreement will make our international tax arrangements fairer and work better," said OECD Secretary-General Mathias Cormann in a statement. "This is a major victory for effective and balanced multilateralism."
The agreement is supported by all nations in the Organization for Economic Cooperation and Development and the G20.
Ireland did not join the initial agreement and has a corporate tax rate of 12.5%. Ireland agreed to join once the preliminary agreement was revised to remove a stipulation that rates should be set at a minimum of "at least 15%."
"We have secured the removal of 'at least' in the text," Irish Finance Minister Paschal Donohoe said in a statement. "This will provide the critical certainty for government and industry and will provide the long-term stability and certainty to business in the context of investment decisions.”
The agreement stipulates that companies that have a presence in more than one country pay taxes where they generate sales and profits and not just where they have a physical presence. This could affect companies such as Google and Amazon who don’t pay much tax in certain countries and have earned big profits as a result, according to CNN.
The agreement is expected to be implemented in 2023, but each country must pass the legislation on its own. It will need to be passed by a two-thirds majority in the U.S. Senate, which could be an uphill battle.