An ambitious 2021 agreement by more than 140 countries and territories to weed out tax havens and force multinational corporations to pay a minimum tax has been weakened by loopholes and will raise only a fraction of the revenue that was envisioned, a tax watchdog backed by the European Union (EU) has warned.

The landmark agreement, brokered by the Organization for Economic Cooperation and Development (OECD), set a minimum global corporate tax of 15%. The idea was to stop multinational corporations, among them Apple and Nike, from using accounting and legal maneuvers to shift earnings to low- or no-tax havens.

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“Those havens are typically places such as Bermuda and the Cayman Islands where the companies actually do little or no business. The companies’ manoeuvres result in lost tax revenue of $100 billion to $240 billion a year,” the OECD has said.

According to the report, being released on Monday by the EU Tax Observatory, the agreement was expected to raise an amount equal to nearly 10% of global corporate tax revenue. Instead, because the plan has been weakened, it says the minimum tax will generate only half that — less than 5% of corporate tax revenue.

Much of the hoped-for revenue has been drained away by loopholes, some of them introduced as the OECD has been refining details of the agreement, which has yet to take effect. The watchdog group estimates that a 15% minimum tax could have raised roughly $270 billion in 2023. With the loopholes, it says, that figure drops to about $136 billion.

Over the summer, the OECD agreed to delay for at least a year — until 2026 — a provision that would have let foreign countries impose additional taxes on U.S. multinational companies that failed to pay at least a 15% rate on their overseas earnings.

The EU Tax Observatory noted that even under the rules of the 2021 agreement, companies would maintain some ability to evade taxes. Companies that have tangible businesses — factories, warehouses, stores and offices — operating in a particular country, for example, could continue to pay a tax rate below 15%. That carveout, the EU Tax Observatory warned, could “give firms incentives to move production to countries with tax rates below 15%.” “This risks exacerbating the race-to-the-bottom with corporate income tax rates,” it said.

Another loophole lets countries offer tax credits, for such things as conducting research and investing in local factories, that can reduce companies’ tax rates below the 15% mark and still comply with the 2021 agreement.

The Tax Observatory also expressed concern that the race by governments to grant tax breaks for green technologies to fight climate change “raises some of the same issues as standard tax competition. It depletes government revenues.”

“It also risks increasing inequality by boosting the after-tax profits of shareholders, who tend to be towards the top of the income distribution,” it said.

The EU Tax Observatory isn’t calling for an outright ban on green-technology subsidies. But it is urging governments to consider other policies to offset the financial gains to the wealthy from such tax breaks.

The group said that multinational corporations shifted $1 trillion — 35% of the profits they earned outside their home countries — to tax havens. American companies account for about 40% of such global profit shifting.

Last week, U.S. Treasury Secretary Janet Yellen said an agreement on a tax on companies that have no physical presence in a country but that earn profits there, such as through digital services, wouldn’t be finalised until 2024.

“There are some matters that are important to the United States and other countries that remain unresolved — open issues that still must be resolved before the treaty can be signed″ she said after meeting with European Finance Ministers.

The EU Tax Observatory is run by Gabriel Zucman, a leading economist and tax-and-inequality researcher of the Paris School of Economics and the University of California, Berkeley. Its report is based on the work of more than 100 researchers around the world who often work with government tax agencies. It draws upon new sources of data on multinational corporate finances and offshore wealth held by corporations.

Also read | Global pact on minimum corporate tax of 15%

Despite its criticisms of what has happened to the minimum tax, the EU Tax Observatory praised a separate effort to stop the wealthy from dodging taxes. In 2017, tax authorities around the world began exchanging taxpayer information from financial institutions to better enforce tax laws. The results, essentially ending bank secrecy, have been dramatic, the Tax Observatory found.

Until the “automatic information exchange,’’ was introduced, it said, virtually all wealth that the world’s rich held offshore went untaxed. Now, only 25% escapes taxes.

Still, the group says, “the effective tax rates of billionaires appear significantly lower than those of all other groups of the population’’ because the richest use tax-avoidance schemes. In the United States, it says, billionaires pay an effective average tax rate of 23%, including all taxes at all levels of government. The poorest 10% of Americans pay more – 25.6%.

The EU TAX Observatory is calling for a 2% global tax on billionaires’ wealth, a proposal it says would raise $250 billion annually from fewer than 3,000 people.