G20 ministers endorse global tax reform
VENICE: G20 finance ministers yesterday gave their backing to a “historic” global deal to tax multinational companies more fairly and urged hold-out countries to sign up. A framework for international tax reform, including a minimum corporate rate of 15 percent, was agreed this month by 131 countries. But the endorsement by the 19 biggest economies plus the European Union will help ensure it becomes a reality following years of negotiations.
“After many years of discussions and building on the progress made last year, we have achieved a historic agreement on a more stable and fairer international tax architecture,” the final statement said. “We endorse the key components of the two pillars on the reallocation of profits of multinational enterprises and an effective global minimum tax.”
French Finance Minister Bruno Le Maire was quick to hail the agreement, saying it was a once-in-a-century opportunity for reform. “There is no turning back. We are putting an end to the fiscal race to the bottom and the digital giants will now pay their fair share of taxes,” he said.
The reforms aim to prevent countries competing to offer the lowest tax rates to attract investment, which has often resulted in multinationals paying derisory levels of tax. Final agreement is not expected until the run-up to the G20 leaders’ summit in Rome in October.
The 15 percent minimum tax rate was agreed on July 1 under the auspices of the Organization for Economic Cooperation and Development (OECD). Countries including the United States, France and Germany, along with aid agencies such as Oxfam, have been pressing for a higher rate. But some nations are opposed even to this, including EU member Ireland, which lured Apple and Google to Dublin with low tax rates.
In their final statement, the G20 ministers said they “invite all members” of the negotiations... that have not yet joined the international agreement to do so”. The minimum rate is expected to affect fewer than 10,000 major companies, but the OECD estimates an effective 15 percent rate would generate an extra $150 billion in revenue per year.
The measure is one of two so-called pillars of global tax reform that have been under negotiation for years, but which have been given new impetus under US President Joe Biden. The other would give countries a share of the taxes on profits earned in their territory. Multinationals operate in many countries - oil giant BP is present in 85, for example - but usually pay taxes on profits only in tax domiciles cherry-picked for their low rates.
It would initially apply to the top 100 or so companies, and is targeted at the most aggressive users of taxreducing domiciles, such as technology giants Google, Amazon, Facebook and Apple. The G20 ministers were meeting for the first time in person since Feb 2020, at the start of the global coronavirus pandemic, although China and India are attending virtually. — AFP