Here's What Global Minimum Tax Agreement Means for Indonesia

Summary

Major reform of the international tax system, finalized on October 8 at the Organization for Economic Cooperation and Development (OECD), will ensure that multinational enterprises (MNEs) will be subject to a minimum 15 percent tax rate from 2023. The landmark deal, agreed by 136 countries and jurisdictions representing more than 90 percent of global GDP, will also reallocate more than US$ 125 billion of profits from around 100 of the world's largest and most profitable MNEs to countries worldwide. It ensured these firms pay a fair share of tax wherever they operate and generate profits.

Following years of intensive negotiations to bring the international tax system into the 21st century, 136 jurisdictions joined the Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. It updated and finalized a July political agreement by members of the Inclusive Framework to fundamentally reform international tax rules.

"This agreement will make our international tax arrangements fairer and work better," OECD Secretary-General Mathias Cormann wrote on OECD's website. The global agreement is a major victory for effective and balanced multilateralism. It is a far-reaching agreement that ensures our international tax system fits our purpose in a digitalized and globalized world economy. "We must now work swiftly and diligently to ensure the effective implementation of this major reform," Cormann said. Countries are aiming to sign a multilateral convention during 2022, with effective implementation in 2023.

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