The rich nations of the world have devised a set of technical principles that could revolutionize corporate taxation for multinational corporations and generate $ 100 billion in additional tax revenues worldwide.
The plans of the new system are ready to be implemented if a political agreement can be reached next year, the OECD said on Monday.
The Paris-based organization has sought consensus among more than 135 nations on reforms that would allow tax authorities to levy up to 4 percent more corporate tax.
The question of whether an international political agreement can be reached on tax changes will be one of the first big tests for the next US president after the November elections. America is the main reason political progress has stalled on a deal.
Pascal Saint-Amans, Head of Tax Administration at the OECD, said in an interview with the FT: "We have the building blocks ready for the moment when the political dynamics change."
The technical work on the new framework, which has been carried out at the OECD for more than a year, has produced blueprints that have been internationally agreed as long as the political differences that have weighed on the talks this year can be bridged in 2021.
Failure to pass reforms would likely lead to trade wars costing 1 percent of global national income, the OECD warned.
"We won't reach an agreement this year, but we've been working on what [a unified global corporate tax system] should look like," said Saint-Amans.
This week all G20 members will reiterate their desire for an agreement, but are not expected to indicate whether they are ready to make the necessary political compromises.
The Independent Commission on International Business Taxation Reform, an advocacy group looking to take action against multinational taxes, said the lack of political agreement shows that countries have "a false sense of the national interest [that is] protecting multinational corporations serves ".
She called on countries to push digital taxes to get the multinationals and nations to come to an agreement in 2021.
The OECD's blueprint includes two main pillars to ensure that multinational corporations pay corporate taxes on profits in which they operate and cannot shift them to tax havens to evade tax authorities around the world.
The first element is intended to revolutionize corporate taxation. Highly profitable multinational corporations, including US tech giants and European luxury goods companies, would find that some of their global profits are shared among the countries their customers are in, even if they sell remotely.
This element would be quite small at first, but it would be a fundamental change from the current system where corporate tax is based on a company's physical location.
This element of reform wouldn't bring much additional revenue, but would redistribute around $ 100 billion in corporate tax revenue around the world – to ensure that companies like Google, Amazon and Facebook in Europe and developing countries, as well as LVMH and Mercedes-Benz, pay more taxes paid more in the US.
The second pillar would be an effective minimum corporate tax rate that any multinational corporation would have to pay regardless of where it is headquartered. If a company were located in a tax haven with low corporate rates, other countries would have the right to levy taxes up to the global minimum, removing the incentive to shift profits to low-tax areas.
In total, the two pillars could bring in up to $ 100 billion a year without raising corporate tax rates, including the amount the US is already collecting from a similar mechanism it is already unilaterally applying.
Increasing the effectiveness of corporate tax collection would reduce the investment of multinationals a little, but it would cost less than 0.1 percent of global gross domestic product, according to the OECD.
The alternative is that countries would continue to take unilateral measures such as taxing digital services – a move that is causing anger across the US political spectrum as many of their politicians believe these measures unfairly discriminate against American companies.
If the world went down this path, the result would be "an increase in uncoordinated and unilateral tax measures and an increase in harmful tax and trade disputes," which would cost up to 1 percent of global GDP, the OECD warned.
To reach an agreement, the next US government will likely have to admit that US companies cannot treat the first pillar as voluntary.
The UK and France insist on this as part of a global compromise, although some other European countries believe that an agreement could be reached on the second pillar alone.