Day: October 9, 2021

A global deal to ensure big companies pay a minimum tax rate of 15% and make it harder for them to avoid taxation has been agreed upon by 136 countries, the Organization for Economic Cooperation and Development said Friday.

The OECD said four countries — Kenya, Nigeria, Pakistan and Sri Lanka — had not yet joined the agreement, but that the countries behind the accord together accounted for over 90% of the global economy.

Here are the main points of the accord:

Why a global minimum tax?

With budgets strained after the COVID-19 crisis, many governments want more than ever to discourage multinationals from shifting profits — and tax revenues — to low-tax countries regardless of where their sales are made.

Increasingly, income from intangible sources such as drug patents, software and royalties on intellectual property has migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries.

The minimum tax and other provisions aim to end decades of tax competition between governments to attract foreign investment.

How would a deal work?

The global minimum tax rate would apply to overseas profits of multinational firms with 750 million euros ($868 million) in sales globally.

Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could “top up” their taxes to the 15% minimum, eliminating the advantage of shifting profits.

A second track of the overhaul would allow countries where revenues are earned to tax 25% of the largest multinationals’ so-called excess profit — defined as profit in excess of 10% of revenue.

What happens next?

Following Friday’s agreement on the technical details, the next step is for finance ministers from the Group of 20 economic powers to formally endorse the deal, paving the way for adoption by G-20 leaders at a summit at the end of this month.

Nonetheless, questions remain about the U.S. position, which hangs in part on a domestic tax reform the Biden administration wants to push through the U.S. Congress.

The agreement calls for countries to bring it into law in 2022 so that it can take effect by 2023, an extremely tight timeframe given that previous international tax deals took years to implement.

Countries that have in recent years created national digital services taxes will have to repeal them.

What will be the economic impact?

The OECD, which has steered the negotiations, estimates the minimum tax will generate $150 billion in additional global tax revenues annually.

Taxing rights on more than $125 billion of profit will be additionally shifted to the countries were they are earned from the low tax countries where they are currently booked.

Economists expect that the deal will encourage multinationals to repatriate capital to their country of headquarters, giving a boost to those economies.

However, various deductions and exceptions baked into the deal are at the same time designed to limit the impact on low tax countries like Ireland, where many U.S. groups base their European operations.

Source: Voice of America

When the remnants of Hurricane Ida dumped record-breaking rain on the East Coast this month, staircases into New York City’s subway tunnels turned into waterfalls and train tracks became canals.

In Philadelphia, a commuter line along the Schuylkill River was washed out for miles, and the nation’s busiest rail line, Amtrak’s Northeast Corridor running from Boston to Washington, was shut down for an entire day.

Nearly a decade after Superstorm Sandy spurred billions of dollars in investment in coastal flooding protection up and down the East Coast — some of which remains unfinished — Hurricane Ida and other storms this summer provided a stark reminder that more needs to be done — and quickly — as climate change brings stronger, more unpredictable weather to a region with some of the nation’s oldest and busiest transit systems, say transit experts and officials.

“This is our moment to make sure our transit system is prepared,” said Sanjay Seth, Boston’s “climate resilience” program manager. “There’s a lot that we need to do in the next 10 years, and we have to do it right. There’s no need to build it twice.”

In New York, where some 75 million gallons (285 million liters) of water were pumped out of the subways during Ida, ambitious solutions have been floated, such as building canals through the city.

But relatively easy, short-term fixes to the transit system could also be made in the meantime, suggests Janno Lieber, acting CEO of the Metropolitan Transit Authority.

Installing curbs at subway entrances, for example, could prevent water from cascading down steps into the tunnels, as was seen in countless viral videos this summer.

More than 400 subway entrances could be affected by extreme rains from climate change in coming decades, according to projections from the Regional Plan Association, a think tank that plans to put forth the idea for a canal system.

“The subway system is not a submarine. It can’t be made impervious to water,” Lieber said. “We just need to limit how quickly it can get into the system.”

In Boston, climate change efforts have focused largely on the Blue Line, which runs beneath Boston Harbor and straddles the shoreline north of the city.

This summer’s storms were the first real test of some of the newest measures to buffer the vulnerable line.

Flood barriers at a key downtown waterfront stop were activated for the first time when Tropical Storm Henri made landfall in New England in August. No major damage was reported at the station.

Officials are next seeking federal funds to build a seawall to prevent flooding at another crucial Blue Line subway stop, says Joe Pesaturo, a spokesperson for the Massachusetts Bay Transportation Authority. The agency has also budgeted for upgrading harbor tunnel pumps and is weighing building a berm around an expansive marsh the Blue Line runs along, he said.

In Philadelphia, some flood protection measures completed in Superstorm Sandy’s wake proved their worth this summer, while others fell short.

Signal huts that house critical control equipment were raised post-Sandy along the hard-hit Manayunk/Norristown commuter line, but it wasn’t high enough to avoid damage during Ida, said Bob Lund, deputy general manager of the Southeastern Pennsylvania Transportation Authority.

On the bright side, shoreline “armoring” efforts prevented damaging erosion in what was the highest flooding in the area since the mid-1800s. That has buoyed plans to continue armoring more stretches along the river with the cable-reinforced concrete blocks, Lund said.

If anything, he said, this year’s storms showed that flood projections haven’t kept up with the pace of environmental change.

“We’re seeing more frequent storms and higher water level events,” Lund said. “We have to be even more conservative than our own projections are showing.”

In Washington, where the Red Line’s flood-prone Cleveland Park station was closed twice during Hurricane Ida, transit officials have begun developing a climate resiliency plan to identify vulnerabilities and prioritize investments, said Sherrie Ly, spokesperson for the Washington Metropolitan Area Transit Authority.

That’s on top of the work WMATA has undertaken the last two decades to mitigate flood risks, she said, such as raising ventilation shafts, upgrading the drainage systems and installing dozens of high-capacity pumping stations.

On balance, East Coast transit systems have taken laudable steps such as sketching out climate change plans and hiring experts, said Jesse Keenan, an associate professor at Tulane University in New Orleans who co-authored a recent study examining climate change risks to Boston’s T.

But it’s an open question whether they’re planning ambitiously enough, he said, pointing to Washington, where subway lines along the Anacostia and Potomac rivers into Maryland and Virginia are particularly vulnerable.

Similar concerns remain in other global cities that saw bad flooding this year.

In China, Premier Li Keqiang has pledged to hold officials accountable after 14 people died and hundreds of others were trapped in a flooded subway line in Zhengzhou in July. But there are no concrete proposals yet for what might be done to prevent deadly subway flooding.

In London, efforts to address Victorian-age sewer and drainage systems are too piecemeal to dent citywide struggles with flooding, says Bob Ward, a climate change expert at the London School of Economics.

The city saw a monsoon-like drenching in July that prompted tube station closures.

“There just isn’t the level of urgency required,” Ward said. “We know these rain events will get worse, and flooding will get worse, unless we significantly step up investment.”

Other cities, meanwhile, have moved more swiftly to shore up their infrastructure.

Tokyo completed an underground system for diverting floodwater back in 2006 with chambers large enough to fit a space shuttle or the Statue of Liberty.

Copenhagen’s underground City Circle Line, which was completed in 2019, features heavy flood gates, raised entryways and other climate change adaptations.

How to pay for more ambitious climate change projects remains another major question mark for East Coast cities, said Michael Martello, a Massachusetts Institute of Technology researcher who co-authored the Boston study with Keenan.

Despite an infusion of federal stimulus dollars during the pandemic, Boston’s T and other transit agencies still face staggering budget shortfalls as ridership hasn’t returned to pre-pandemic levels.

The stunning images of flooding this summer briefly gave momentum to efforts to pass President Joe Biden’s $3.5 trillion infrastructure plan. But that mammoth spending bill, which includes money for climate change preparedness, is still being negotiated in Congress.

“It’s great to have these plans,” Martello said. “But has to get built and funded somehow.”

Source: Voice of America