Arab Times

G-20 ministers back plan to stop use of tax havens

Compete on economic strengths, not low tax rates: Yellen


VENICE, July 11, (AP): Top finance officials representi­ng most of the world’s economy have backed a sweeping revision of internatio­nal taxation that includes a 15% global minimum corporate levy to deter big companies from resorting to low-rate tax havens.

Finance ministers from the Group of 20 countries endorsed the plan at a meeting Saturday in Venice.

U.S. Treasury Secretary Janet Yellen said the proposal would end a “self-defeating internatio­nal tax competitio­n” in which countries have for years lowered their rates to attract companies. She said that had been “a race that nobody has won. What it has done instead is to deprive us of the resources we need to invest in our people, our workforces, our infrastruc­ture.”

The next steps include more work on key details at the Paris-based Organizati­on for Economic Cooperatio­n and Developmen­t and then a final decision at the Group of 20 meeting of presidents and prime ministers on Oct. 30-31 in Rome.

Implementa­tion, expected as early as 2023, would depend on action at the national level. Countries would enact the minimum tax requiremen­t into their own laws. Other parts could require a formal treaty. The draft proposal was approved July 1 in talks among more than 130 countries convened by the OECD.

Italy hosted the finance minister’s

meeting in Venice because it holds the rotating chair of the G-20, which makes up more than 80% of the world economy. The event also attracted around 1,000 protesters under the banner “We Are The Tide,” an umbrella group of environmen­tal and social justice activists, including opponents of large cruise ships and the hordes of tourists they bring to the lagoon city. A small group scuffled Saturday with police after breaking away from an approved demonstrat­ion area.

The U.S. already has a minimum tax on overseas earnings, but President Joe Biden has proposed roughly doubling the rate to 21%, which would more than comply with the proposed global minimum. Raising the rate is part of a broader proposal to fund Biden’s jobs and infrastruc­ture plan by raising the domestic corporate tax rate to 28% from 21%.

Yellen said she was “very optimistic” that Biden’s infrastruc­ture and tax legislatio­n “will include what we need for the United States to come into compliance” with the minimum tax proposal.

Republican­s in the Congress have expressed opposition to the measure. Rep. Kevin Brady of Texas, the top Republican on the tax-writing Ways and Means Committee, has blasted the OECD deal, saying, “This is an economic surrender to China, Europe and the world that Congress will reject.”

The internatio­nal tax proposal aims to deter the world’s biggest firms from using accounting and legal schemes to shift their profits to countries where little or no tax is due - and where the company may do little or no actual business. Under the minimum, companies that escape taxes abroad would pay them at home. That would eliminate incentives for using tax havens or for setting them up.

From 2000-2018, U.S. companies booked half of all foreign profits in seven low-tax jurisdicti­ons: Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherland­s, Singapore and Switzerlan­d.

Yellen said that deterring the use of tax havens will let countries compete on economic fundamenta­ls - instead of by offering ever-lower tax rates that deprive government­s of money for infrastruc­ture and education.

Three European Union countries that took part in talks over the minimum tax have refused to endorse the proposal. Ireland, Hungary and Estonia could obstruct adoption in Europe, where tax matters at the EU level require unanimity. Ireland, whose low tax rates are part of its pro-business economic model, has said its 12.5% headline rate is a fair rate.

 ??  ?? United States Secretary of the Treasury Janet Yellen speaks during a press conference at a G20 Economy, Finance ministers and Central bank governors’ meeting in Venice, Italy, Sunday, July 11, 2021. (AP)
United States Secretary of the Treasury Janet Yellen speaks during a press conference at a G20 Economy, Finance ministers and Central bank governors’ meeting in Venice, Italy, Sunday, July 11, 2021. (AP)

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