U.S. Participation Needed To Make Global Tax Reform Effective

A global deal to ensure major international firms including IT giants pay their fair share of tax no matter where they are located will stipulate the participation of the United States as a requirement to become effective, Japanese government sources said.

Photo Insert: Tech giants known as GAFA including Google and Apple are all based in the United States.

Since the tech giants known as GAFA including Google and Apple are all based in the United States, the requirement is aimed at preventing the country's withdrawal from the deal before implementation, they said, Kyodo News reported.

The tax deal, which includes a global minimum corporate tax rate of 15 percent, was worked out through international negotiations at the Organization for Economic Cooperation and Development (OECD) and was endorsed by Group of 20 members in October.

The OECD will finalize the deal's text in 2022 for ratification by over 130 countries and regions including China and India so the new rules can enter into force in 2023 as agreed.

Around half of roughly 100 companies expected to be subject to the taxation are American corporations. The OECD is considering requiring other major countries' participation for the tax rules' implementation such as Group of Seven members and China, sources said.

Implementation of the agreement with such a requirement is expected to make it difficult for future administrations of the United States to pull out from it, they said. But the prospects for US ratification of the agreement remain unclear as the Senate is evenly divided between Democrats and Republicans.

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