Explained | Global minimum corporate tax deal

As many as 136 countries have entered into a pact to redistribute taxing rights

As many as 136 countries earlier this month to redistribute taxing rights and impose aon large multinational corporations. With the new agreement signed at a meeting of the Organization for Economic Cooperation and Development, countries want to put an end to tax competition that has over the years forced global corporate tax rates to drop.

Large multinational corporations have traditionally been taxed based on where they declare their profits rather than where they actually do business. This allowed several large companies to avoid paying high taxes in countries where they do most of their business by shifting their profits to low-tax jurisdictions. So, an American company like Apple, for instance, can avoid paying high taxes in the United States by declaring its profits as belonging to a subsidiary company in Ireland, where tax rates are lower. This practice of profit shifting has affected the tax revenues of governments and forced them to act.