Global tax reform tops G20 meet in Venice
VENICE: G20 finance ministers gathered Friday in Venice, with global tax reform at the top of the agenda as the world’s biggest economies seek to ensure multinational companies pay their fair share.
Under Italy’s Group of 20 presidency, ministers and central bankers from the 19 richest countries and the European Union were meeting in person for the first time since talks in Riyadh in February 2020, at the start of the coronavirus pandemic.
US Treasury Secretary Janet Yellen, European Central Bank (ECB) chief Christine Lagarde and Russian finance minister Anton Siluanov were among those gathering under tight security in Venice.
However, China and India have opted for a virtual presence in the lagoon city, where the Arsenal area has been closed off from tourists and locals for the two-day event.
The countries of the G20 have already signed up to a framework for reform agreed on July 1 among members of the Organisation for Economic Cooperation and Development (OECD), notably for a global minimum corporation tax rate of 15 percent.
But they are now seeking a political deal that will help the agreement – aimed at ending tax havens and stopping global companies benefiting as nations compete to offer the lowest rates – become a reality.
“Now is the time for the international community to rally together and build on this momentum to ensure we get the deal’s final details over the line by October,” British finance minister Rishi Sunak said as he set off for Venice.
The minimum rate is one of two so-called pillars of global tax reform that have been under negotiation for years.
The other aims to tax multinationals where they make their profits, not where they are headquartered, and is particularly aimed at technology giants such as Google, Amazon, Facebook and Apple, who pay derisory levels of tax compared to their income.
According to a draft obtained by AFP of the final statement, which is still being discussed, the finance ministers in Venice will ‘endorse’ the OECD’s ‘historic agreement on a more stable and fairer international tax architecture’.
Final agreement on the minimum tax rate is not expected until the run-up to the G20 leaders’ summit in October.
But the Venice talks are an opportunity to thrash out further details and exert pressure on those who have not yet signed up to the OECD deal, which so far has been backed by 131 countries.
EU members Estonia, Hungary and Ireland, which have all used low tax rates to attract investment, are among the holdouts.
Several countries by contrast are pushing for a higher rate than 15 per cent, notably the United States and Germany.
“Fifteen per cent for the minimum taxation on a corporate tax is a minimum, and France aims of having more than 15 per cent”, French Finance Minister Bruno Le Maire told Bloomberg TV.
“I don’t want to give a specific figure, but I think we need to be ambitious. This is the unique opportunity that we’ll have to have a fairer, more efficient international taxation system for the 21st century,” he said.
But others are less optimistic about their chances.
“We must be realistic,” said a German government source.
“Other countries already have a problem with this level.”
Even if a minimum rate is implemented, this would not necessarily mean the end of tax havens, noted Giuliano Noci, professor of strategy at Milan’s Polytechnic business school.
“The rates fixed by different countries can still vary significantly, and so fiscal optimisation remains at the heart of the strategy of technology giants and other multinationals,” he told AFP.
The G20 ministers in Venice are also expected to support an initiative by the International Monetary Fund (IMF) to increase aid to the most vulnerable countries through the allocation of US$650 billion of special drawing rights.