Full text of agreement will not be ready by mid-year as originally planned, with implementation now expected in 2024 rather than 2023.
The OECD has said that an international agreement to increase the amount of tax paid by multinationals is falling behind schedule and may take a year longer than anticipated to implement.
Speaking at the World Economic Forum in Davos, OECD secretary-general Mathias Cormann said there were “difficult discussions under way” and that the landmark agreement would only come into force in 2024 at the earliest.
The agreement, signed in October 2021, was originally set for implementation in 2023. Reports say the agreement has come under fire from Republican lawmakers in the US, while Europe is no longer unanimous on the reform – Poland being the main holdout.
The first pillar of the agreement will re-allocate profits and taxing rights to the markets where multinational enterprises earn profits. This requires an international treaty to come into force, which would require all signatories to be close to a consensus and willing to change their national tax rule books.
Cormann said the lack of consensus meant that the full text of the agreement will “more likely” be ready by the end of the year, rather than mid-year as originally planned.
“We deliberately set a very optimistic timeline for implementation to keep the pressure on and it has helped keep the momentum going,” he said. “But I suspect it is probably most likely that we will end up with a practical implementation from 2024 onwards.”
Cormann said the second pillar of the agreement may still come into force sooner. The second pillar sets a minimum corporate tax rate of 15%, allowing countries to tax profits of their companies made abroad if those jurisdictions do not impose the minimum tax.