The world has agreed on a global minimum corporate tax rate—but is it enough?

In 2018, American multinational companies reported making $97 billion in Bermuda. Given that the island nation’s GDP that year was $7.2 billion, that figure would appear outlandish. At the time, American companies reported 740 employees on the island, meaning each would have had to be responsible for raking in an impressive $131 million on average for their organizations.

These aren’t bungled numbers, rather the results of commonly used offshore tactics to minimize tax burdens. Due to low corporate tax rates in certain nations, large corporations can engage in crafty “accounting gimmicks,” like establishing tiny subsidiaries abroad and running money through those countries, to increase earnings and avoid forking out to the International Revenue Service. Some of those nations currently attractive to foreign investors for these low taxes—Ireland, Hungary, and Estonia—have became the latest to join a worldwide consensus on a global minimum tax rate imposed on corporations making profits overseas.

With those additions, 136 countries, representing 90% of the world’s GDP, are signed onto the agreed-upon 15% minimum rate. If these nations pass individual laws to ratify the change, it could be established worldwide by 2023, allowing countries to raise their tax revenues, and stop a “race to the bottom,” whereby every country competes to sell a lower rate to interested businesses, and therefore attracts foreign investment. But, experts say the U.S. government can do even more to make sure corporations pay their fair share.

The result of many months of negotiations, the decision means companies doing business abroad will have to pay a minimum tax of 15% on their overseas profits, leaving little advantage to continue various “accounting gimmicks” currently in play, says Steve Wamhoff, director of federal tax policy at the Institute on Taxation and Economic Policy (ITEP), a nonprofit, nonpartisan think tank. Ireland, for instance, has enticed Big Tech businesses to its shores, creating jobs and investment, but it has also allowed companies like Google to move its money through Ireland, and then through countries like Bermuda, to reduce its tax burdens. (This is known as the Double Irish; there is also a Double Irish Dutch Sandwich.)

Countries with lower tax rates held out during the global negotiations, believing they would suffer in the long term, fearing businesses pulling out and moving home, with little incentive to stay, leading to less infusion of money and jobs into their economies. But, Wamhoff says while a country like Bermuda may profit from the old model, from gaining subsidiary incorporation fees, “the people who are benefiting the most clearly are the shareholders of Apple,” he says. “They’re just getting richer than they would otherwise.”

The G20 are likely to finally confirm the 15% proposal at the end of October. Then, it needs to be passed by each country’s legislative bodies. That may be an easier feat in many other developed countries than in the U.S., which may face obstacles in Congress. Republicans have long argued that cracking down on offshore profits will make the U.S. uncompetitive. “That has always been a lame argument,” Wamhoff says, “but now that argument seems to be totally dead, with other countries agreeing to do this.” The best bet, Wamhoff says, is to ensure it’s included in the reconciliation bill that’s currently being debated, which Treasury Secretary Janet Yellen confirmed it will. If it didn’t pass in the U.S., other countries could still go ahead, but corporations may convince other nations that it’s not worth doing without the U.S.

There are still notable holdouts in the consensus: Kenya, Nigeria, Pakistan, and Sri Lanka. Developed countries argued that they were implementing the standard partly to boost more equitable economic growth around the world, but developing countries won’t immediately benefit from the higher tax rate, because they don’t host companies, says Didier Jacobs, senior policy advisor at Oxfam America. According to a statement from the African Tax Administration Forum, many nations wanted a higher rate of at least 20%, since most African countries have higher tax rates anyway (30% in both Kenya and Nigeria). African multinationals will therefore still have little incentive to keep business at home.

Jacobs says there are other bigger economies, including Argentina, that also believe they’re getting a bad deal, but these four smaller economies can afford to take a stand to make their voices heard. “It is shameful that a handful of tax havens have further watered down the deal at the last minute,” he wrote in a statement. He added in an email: “The direct benefits to rich countries will be tangible and immediate. Which is particularly egregious in this time of global crisis.”

Indeed, the minimum rate is a step down even from the 21% the Biden administration was proposing. But the U.S. could still set its own offshore corporate profit tax rate at that level (it’s currently 10.5%), six points more than the global minimum. That would mean that U.S. businesses paying the 15% would also owe 6% more if the U.S. implemented its own rate. (The House Ways and Means Committee has less ambitious goals than Biden, recommending a rate of 16.5%.)

A higher U.S. rate would be a way to earn more domestic revenue, especially at a time in need of public spending in the rebuilding from COVID-19, beyond the increase in world revenue estimated at $150 billion, which Jacobs says is not particularly high. He adds that Congress could also change a rule in place that says companies are only taxed at all if their return on foreign investment hits a 10% threshold. “This international agreement really just set minimum standards,” he says. “Congress absolutely should go beyond this if they want to really fix these problems.”