G-20 finance ministers back tax deal on multinational companies

Finance ministers from the U.S. and Europe expressed confidence that a global tax deal endorsed by the Group of 20 on Saturday has enough momentum to overcome domestic political obstacles in time for it to be finalized in October.

“There’s more work to be done, but I’m really hopeful that with the growing consensus we’re on a path to a tax regime that will be fair for all of our citizens,” U.S. Treasury Secretary Janet Yellen told reporters.

The landmark agreement aims to revamp rules that have allowed major companies to save billions by shifting profits to low tax jurisdictions. A total of 132 countries last week backed the two-pillar accord at the OECD that seeks to address that situation with a global minimum rate, as well as making multinational companies pay more in places where they operate rather than where they are headquartered.

Yellen was particularly confident that the U.S. Congress would pass legislation needed to implement at least the part of the proposed deal that imposes a minimum tax rate.

German Finance Minister Olaf Scholz said he believes European holdouts Ireland, Hungary and Estonia would be brought on board. “This is a big historic moment.

The G-20 has now reached an agreement here for new rules on international taxation to be introduced,” he said.

France’s Finance Minister Bruno Le Maire said “there is no turning back” from the G-20 officials giving their stamp of approval.

The three finance chiefs, whose countries have for years haggled over the details of an agreement, hailed the political endorsement in Venice as killing off a competition among countries that have sought to attract corporations with lower and lower taxes.

Getting that finalized, however, will require support from Congress, where many Republican lawmakers and some Democrats have expressed serious reservations about both so-called pillars of the deal.

Yellen said she has engaged in talks with the Democratic leaders of key congressional committees on the Biden administration’s tax proposals. These would cover not only the international agreement but also measures needed to pay for the president’s ambitious plans to invest in infrastructure and other priorities over the next decade.

The Treasury chief said changes necessary to comply with the minimum corporate taxes could be passed alongside other Biden proposals through a process known as budget reconciliation that won’t require Republican support in the closely divided legislature.