New landmark tax rate for some of the largest companies worldwide

The United States joined 135 other countries agreeing to enact a minimum global corporate tax rate of 15 percent for some of the largest companies in the world. The Paris-based Organization for Cooperation and Economic Development (OCED) hosted the talks that led to the agreement. The video above shows France’s finance minister discussing the agreement.

The minimum corporate tax rate would apply to companies with turnover above a $889 million with only the shipping industry exempted.

In addition to the minimum corporate tax rate, the agreement would allow countries to tax some of the earnings of companies whose activities don’t involve a physical presence. A top-up provision would mean tax avoided overseas would have to be paid at home.

“Today’s agreement represents a once-in-a-generation accomplishment for economic diplomacy,” Treasury Secretary Janet Yellen said in a statement. “We’ve turned tireless negotiations into decades of increased prosperity – for both America and the world.”

Just because a agreement has been reached between countries, doesn’t mean the contents of the it are automatically enacted in the U.S. The next step is for the deal to be taken up by the Group of 20 finance ministers next week. It will then go to G-20 leaders for final approval at a summit in Rome at the end of October.

The U.S. could play a major role in whether or not the deal comes to fruition. Congress is considering a similar minimum corporate tax rate legislation proposed by President Joe Biden. If Congress rejects the legislation, it could cast uncertainty over the entire agreement.

“This deal paves the way for Congress to enact those proposals, and I’m hopeful they’ll do so swiftly though the reconciliation process,” Yellen said.

If implemented, the agreement would bring in an estimated $150 billion in tax revenue. “This deal is a victory for American families, who will benefit from the revenues this deal raises to pay for infrastructure, child care, and clean energy,” Yellen said. “It’s a win for American businesses, which will no longer have to compete on an international playing field tilted against them.”