Leaders of the world’s 20 biggest economies (G20) have endorsed a standard global minimum tax rate on big multinational businesses.
In a meeting attended by G20 heads of state and government in the ongoing G20 summit in Rome, Italy, the world great nations noted that the new tax rules will see the profits of large multinational corporations taxed at a rate of at least 15 percent.
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.”Joe Biden
President Biden stated that the new tax is expected to impact all economies in the world.
“This is more than just a tax deal – it’s diplomacy reshaping our global economy and delivering for our people.”Joe Biden
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.
Commenting on the development, Janet Yellen, US Treasury Secretary hailed the G20’s endorsement of the tax deal as ‘historic’. It was also described by the German Chancellor, Angela Merkel as a ‘great success’.
The German Chancellor averred that, in a digital era as this, it is fair that the G20 came up with the current tax deal.
“The world community has agreed on a minimum taxation of companies. That is a clear signal of justice in times of digitalisation.”Angela Merkel
The Organisation for Economic Cooperation and Development (OECD), which steered the tax negotiations, estimated that the minimum tax will generate $150bn in additional global tax revenues annually.
The OECD hinted that 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, reechoed the voice of the German Chancellor, noting that the deal clinched in Rome “will make our international tax arrangements fairer and work better in a digitalised and globalised economy”.
Mr Cormann opined that, the minimum tax rate will completely eliminate the incentive for businesses around the world to restructure their affairs to avoid tax. He thus, contended that the deal will “deliver significant benefits to countries around the world including and in particular developing countries”.
On the other hand, 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.”Mr Cormann
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.