G20 economy ministers approve global tax deal
The world’s largest economies have backed a global tax reform deal that would impose a minimum levy on multinational corporations, stepping up pressure on a small number of resistant countries to sign the deal.
G20 economy ministers and central bankers meeting in Venice on Saturday issued a joint statement approving the tax deal, which was agreed by G7 countries last month and backed by 130 countries in talks hosted by the OECD in Paris earlier this month.
The statement said the deal was “a historic agreement on a more stable and fairer international tax architecture” and the G20 invited “all members of the OECD. . . who have not yet joined the agreement to do so ”.
He called on all countries participating in the negotiations to “quickly resolve the remaining issues and finalize the design elements” by the next G20 meeting in October.
Janet Yellen, US Treasury Secretary, said the G20 will try to get small recalcitrant countries, including Ireland and Hungary, to agree to the deal, but that was not essential moving forward.
“It is not essential that all countries participate,” she said.
Bruno Le Maire, French Minister of Finance, called the tax agreement a “unique tax revolution in a century”.
“The reform of international taxation has been agreed and there is no going back,” he said.
The next steps for the October G20 meeting will be to set a globally agreed minimum tax rate and how the profit shares of taxation will be distributed among countries.
Eight countries, including Ireland, Barbados, Hungary and Estonia, did not agree to the minimum 15 percent levy, supported by the United States, China, India and most countries in the EU. Sri Lanka, Nigeria, Kenya and Saint Vincent and the Grenadines are other refractories.
Some low-tax jurisdictions and investment centers, such as the Bahamas and Switzerland, have already registered.
Peru did not originally sign because it did not have a government in place when the deal was made, but it has now done so, making 131 signatories.
While the political endorsement from the G20 will provide a boost to efforts to reach a final deal, which is expected to be implemented by 2023, important technical issues remain and are unlikely to be resolved this weekend.
These include various so-called exclusionary agreements that would allow certain countries to withdraw from the agreement to encourage investment.
Another obstacle should be the Republican opposition in the US Congress; President Joe Biden will likely need congressional approval for at least some elements of the proposal.
Kevin Brady, the top Republican on the House Ways and Means Committee, described the deal as “a dangerous economic surrender that sends American jobs overseas.”