G20 leaders endorse global minimum tax on big businesses
New tax rules will see the profits of large multinational corporations taxed at a rate of at least 15 percent.
Leaders of the world’s 20 biggest economies have endorsed a global minimum tax of 15 percent on big multinational businesses.
They will formally adopt the new rules at the continuing G20 summit in Rome on Sunday.
Joe Biden, the president of the United States who is in the Italian capital for the discussions, hailed the tax deal as a “game-changer”.
“Here at the G20, leaders representing 80% of the world’s GDP – allies and competitors alike – made clear their support for a strong global minimum tax,” Biden said in a tweet on Saturday.
“This is more than just a tax deal – it’s diplomacy reshaping our global economy and delivering for our people.”
The tax rules, part of a reform plan inked by almost 140 nations, will make it harder for multinational corporations – including giants like Google, Amazon, Facebook, Microsoft or Apple – from avoiding taxation by establishing offices in low-tax jurisdictions.
The rules will also aim to put an end to decades of tax competition between governments to attract foreign investment.
US Treasury Secretary Janet Yellen hailed the G20’s endorsement of the tax deal as “historic” while German Chancellor Angela Merkel called it a “great success”.
“There are good things to report here,” Merkel told reporters on Saturday. “The world community has agreed on a minimum taxation of companies. That is a clear signal of justice in times of digitalisation.”
The Reuters news agency, citing a draft communique, said the G20 wants to have the rules in force in 2023.
The Organisation for Economic Cooperation and Development (OECD), which steered the tax negotiations, estimates the minimum tax will generate $150bn in additional global tax revenues annually.
It says taxing rights on more than $125bn of profit will also be shifted to the countries where they are earned from the low-tax countries where they are currently booked.
Mathias Cormann, secretary-general of the OECD, said that the deal clinched in Rome “will make our international tax arrangements fairer and work better in a digitalised and globalised economy”.
The minimum rate “completely eliminates the incentive for businesses around the world to restructure their affairs to avoid tax,” he said, contending that this will also “deliver significant benefits to countries around the world including and in particular developing countries”.
But Civil 20, which represents some 560 organisations from more than 100 countries in a network making recommendations to the G20, was less enthusiastic.
The 15 percent rate is “a little more than those (rates) we’d consider fiscal paradises,” Civil 20 official Riccardo Moro told reporters.
On other issues crucial to fairness across the globe – including access to COVID-19 vaccines – the summit on the first of its two days heard pleas to boost the percentage of those in poor countries being vaccinated.
Italian Prime Minister Mario Draghi made a sharp call to pick up the pace in getting vaccines to poor countries.
Draghi, the summit host, said Saturday that only three percent of people in the world’s poorest countries are vaccinated, while 70 percent in rich countries have had at least one shot.
“These differences are morally unacceptable and undermine the global recovery,” said Draghi.
The Rome summit is the leader’s first face-to-face gathering since the start of the COVID-19 pandemic, and while the first day of discussions focused mainly on health and the economy, at the top of Sunday’s agenda is the climate and the environment.
The G20 bloc accounts for an estimated 80 percent of the global greenhouse gas emissions which scientists say must be steeply reduced to avoid climate catastrophe.
For that reason, this weekend’s gathering is seen as an important stepping stone to the United Nations’ “COP26” climate summit attended by almost 200 countries, in Glasgow, Scotland, where most of the G20 leaders will fly directly from Rome.
Italy is hoping the G20 will secure crucial commitments from countries responsible for about 80 percent of global carbon emissions.
But drafts of the G20’s final statements suggest the group will fall short of a firm pledge to achieve “net-zero” emissions by 2050.
The mid-century target date is a goal that UN experts say is needed to cap global warming at 1.5 degrees Celsius, which is seen as the limit to avoid a dramatic acceleration of extreme events such as droughts, storms and floods.
The planet’s largest carbon emitter, China, is aiming for net zero in 2060, while other major polluters such as India and Russia have also not committed to the mid-century deadline.
Presidents Vladimir Putin of Russia and Xi Jinping of China were participating remotely in the Rome summit.