After eight years and eight months of intense negotiations, 137 countries agreed to the global taxation agreement they signed in October. Known as the most important international tax reform in a century, now comes the difficult part-implementing it.

If this happens, governments around the world will receive an additional $150 billion in corporate taxes each year. Although multinational companies will pay higher fees, they will get a level playing field-ensuring that their competitors will not pay less than them. After the 2008 financial crisis, some public anger caused by the use of tax havens by multinational companies will be alleviated.

“The international tax system is in urgent need of reform,” said Janine Juggins, Executive Vice President of Unilever’s Global Tax and Finance Department. “It is in everyone’s best interest to switch to a more stable system,” she said at the FT Global board meeting in December.

But converting political agreements into legally binding commitments can be a long and difficult process. Ironically, due to the polarizing politics that often hinders domestic legislation, the United States, as the main instigator of the agreement, may actually stifle it.

“Everyone knows that no agreement has been signed yet,” said Alex Cobham, chief executive of the Tax Justice Network pressure group.

We want the whole world to start this agreement, so we need approval from all countries

Countries need to legislate to implement the 15% global minimum corporate tax rate by the end of 2022-known as the “second pillar” of the global tax agreement, in order to take effect in 2023.

University of Michigan law professor Reuven Avi-Yonah (Reuven Avi-Yonah) said that the world’s lowest tax rate will be the “easy” part. “It doesn’t need to change the tax treaty,” he said. “You really only need to get the consent of the large economies where most multinational companies are located to achieve this goal.”

Encouragingly, Ireland and Cyprus have announced an increase in their corporate tax rate from 12.5% ??to 15%.EU also Publish The directives of its 27 member states now need to be promulgated through legislation.

The more difficult part of the tax treaty focuses on how to get the world’s largest multinational companies to pay more taxes where they actually sell rather than where they physically exist. This is necessary to avoid the threat of a trade war driven by tax policies such as the digital service tax.

This issue focuses on American technology companies such as Amazon, Google, Apple, and Facebook. For example, Google UK paid 50 million pounds in corporate tax last year, even though its British subsidiary’s revenue was 1.8 billion pounds. This is because Google UK is mainly used as the marketing and sales arm of its European business, which is headquartered in Ireland, where taxes are lower.

The challenge is that for countries to agree to this redistribution of tax rights, which is one of the “pillars” of the transaction, a series of simultaneous changes to the global tax law are required.

One way to achieve this goal is for all 137 signatories of the tax treaty to modify their bilateral tax treaty network-but this is very time consuming. A faster approach recommended by the OECD is to formulate a legally binding multilateral convention, which is signed by countries and then ratified domestically.

Countries are working at the OECD in Paris to draft such a convention. The goal is to reach agreement on implementation around April; then, each country needs to ratify the convention in its own legislature in time for the rules to take effect in 2023.

But such an international treaty is usually hated by the United States-Republican senators oppose it.

The Biden administration believes that this can be accomplished through congressional agreements or other means that will be approved by a simple majority of the Senate through a decisive vote of the vice president, rather than the two-thirds majority required for treaty approval. However, whether this is really feasible is still inconclusive.

Dan Neidle, a tax partner at the law firm Clifford Chance in the United Kingdom, warned that attempts to circumvent problems by reaching an arrangement that is not a treaty could be challenged by laws in the United States and elsewhere.

“Everyone knows this [implementation] It’s a problem,” said Pascal Saint-Amans, head of tax administration at the OECD. “But the feasible assumption is that we have received extremely strong signals from the US government. .. This will happen. “

Others are skeptical. “My personal opinion is that the first pillar cannot be implemented in the United States,” Avi-Yonah said. Mindy Hertzfield, professor of tax practice at the University of Florida Levine School of Law, added that any “workarounds” the government tries to bypass Senate arithmetic are “novel”.

At the same time, even the United States’ ability to pass easier global minimum tax reforms is questionable.Draft legislation on reforms is included in the Biden administration’s $175 million Rebuild Better Infrastructure Act, But it is working hard to pass Congress.

Some stakeholders have warned that if the United States or other major economies fail to approve this part of the agreement, it may derail the entire project.

Luxembourg’s Finance Minister Pierre Gramenia said: “We want the whole world to start this agreement, so we need the approval of all countries.” “The political risk is if a huge economy like the United States or China [or] Such a country. . . lay down. “

If this happens, developing countries that complain about the small taxes that the transaction has brought them may refuse to implement the rest.

As European countries such as France, Austria, Italy, Spain, and the United Kingdom re-impose digital service taxes on large US technology companies, a transatlantic tax war may also occur. agree Decline in exchange for the implementation of global transactions.

“It’s wrong to assume that this problem won’t happen,” Neidel said.

The OECD hopes to complete the entire agreement by 2023. However, the previous reform of the international tax system took an average of two years, and some countries even took as long as seven years.

“This is harder and more complicated,” Neidle said. “Why is it faster?”