G20 ministers approve global tax reform
VENICE: Yesterday, G20 finance ministers gave their support to a “historic” global deal to tax multinational companies more fairly and urged recalcitrant countries to sign. A framework for international tax reform, including a minimum corporate tax rate of 15%, was approved this month by 131 countries. But endorsement by the 19 largest economies plus the European Union will help ensure this becomes a reality after years of negotiations.
“After many years of discussions and on the basis of the progress made last year, we have reached a historic agreement on a more stable and fairer international tax architecture,” the final statement read. “We endorse the key elements of the two pillars on the reallocation of profits of multinational companies and an effective global minimum tax. “
French Finance Minister Bruno Le Maire was quick to welcome the deal, saying it was a unique reform opportunity. “There is no turning back. We are ending the tax race to the bottom and the digital giants will now pay their fair share of taxes,” he said.
The reforms aim to prevent competing countries from offering the lowest tax rates to attract investment, which has often resulted in multinationals paying paltry tax levels. The final deal is not expected until preparations for the G20 leaders’ summit in Rome in October.
The minimum tax rate of 15% was agreed on July 1 under the auspices of the Organization for Economic Co-operation and Development (OECD). Countries like the United States, France and Germany, as well as aid agencies such as Oxfam, have been pushing for a higher rate. But some countries even oppose it, including EU member Ireland, which lured Apple and Google to Dublin with low tax rates.
In their final statement, G20 ministers said they “invite all members” of the negotiations … who have not yet joined the international agreement to do so. ” The minimum rate is expected to affect fewer than 10,000 large companies, but the OECD estimates that an effective rate of 15% would generate $ 150 billion in additional revenue per year.
The measure is one of two so-called pillars of global tax reform that have been under negotiation for years, but received new momentum under US President Joe Biden. The other would give countries a share of taxes on profits made in their territory. Multinationals operate in many countries – oil giant BP has a presence in 85, for example – but typically only pay income taxes in tax homes handpicked for their low rates.
It would apply initially to the first 100 companies or so and is aimed at the most aggressive users of low-tax homes, such as tech giants Google, Amazon, Facebook and Apple. G20 ministers were meeting in person for the first time since February 2020, at the start of the global coronavirus pandemic, although China and India are attending virtually.
Hundreds of protesters converged on Venice, although the Arsenal area of the lagoon city, where the meeting is being held, is cordoned off to the general public. Student Elena Carraro, 20, called the G20 a club of the rich just to protect her own. “We don’t expect the real change, the drastic change that we need. We have to act, we can’t wait for them to do it, because the only thing that interests them is their own wealth, ”she said.
The G20, whose members represent around 85% of the world’s wealth, also discussed climate change and economic recovery from the pandemic, especially how to ensure that the poorest countries are not left behind. The ministers warned that although the global outlook has improved since their last meeting in April, largely due to the roll-out of immunization programs, the crisis was not over.
“The recovery is characterized by large divergences between and within countries and remains exposed to downside risks, in particular the spread of new variants of the COVID-19 virus and different vaccination rhythms,” the statement said. The ministers also supported an initiative by the International Monetary Fund to urgently increase aid to countries struggling to cope with the pandemic through Special Drawing Rights, which are international reserve assets. – AFP