Leaders of the world’s biggest economies on Saturday endorsed a global minimum tax on corporations as part of an agreement on new international tax rules, a step toward building more fairness amid skyrocketing revenues of some multinational businesses.
G20 finance ministers in July had already agreed on a 15 per cent minimum tax. Its formal endorsement at the summit on Saturday in Rome of the world’s economic powerhouses was widely expected.
The tax aims to deter multinational corporations from using clever accounting to elude taxes by using low-rate havens. The idea is that countries with corporate headquarters would top up a company’s tax to 15 per cent if the firm’s profits went undertaxed in another country.
In today’s digital and global economy, profits can come from intangibles such as copyrights and trademarks, and can consequently be easily shifted to countries offering near-zero taxes in hopes of attracting revenue they otherwise wouldn’t have.
A meaningful question is whether the U.S. Congress will pass legislation to comply, since the United States is home to 28 per cent of the world’s 2,000 largest multinationals.
Here at the G20, leaders representing 80% of the world’s GDP – allies and competitors alike – made clear their sustain for a strong global minimum tax. This is more than just a tax deal – it’s diplomacy reshaping our global economy and delivering for our people.
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 raise the percentage of those in poor countries being vaccinated.
Italian chief Minister Mario Draghi made a sharp call to pick up the speed in getting vaccines to poor countries as he opened the conference of the world’s powerhouse economies.
Draghi, the summit great number, said Saturday that only three per cent of people in the world’s poorest countries are vaccinated, while 70 per cent in high countries have had at the minimum one shot.
“These differences are morally unacceptable and undermine the global recovery,” said Draghi, an economist and former chief of the European Central Bank.
French President Emmanuel Macron has pledged to use the summit to press fellow European Union leaders to be more generous in donating vaccines to low-income countries.
But advocates of civil society that have held discussions with G20 officials said suspension of vaccine patents was crucial to increasing access in poor countries.
The summit is also confronting what has been playing out as a two-track global recovery in which high countries are bouncing back faster.
Wealthy countries have used vaccines and stimulus spending to restart economic activity, leaving the risk that developing countries — which explain much of global growth — will keep behind due to low vaccinations and financing difficulties.
Macron has told reporters he expects the G20 to confirm an additional $100 billion US to sustain Africa’s economies.
Italy is hoping the G20 will obtain crucial commitments from countries representing 80 per cent of the global economy — and responsible for about the same amount of global carbon emissions — ahead of the United Nations climate conference, COP26, that begins Sunday in Glasgow.
Most of the leaders at Rome’s summit will head to Glasgow as soon as the G20 ends on Sunday afternoon. Russian President Vladimir Putin and Chinese leader Xi Jinping, whose efforts to reduce emissions are paramount to combating climate change, were participating remotely in the Rome summit.
A recent UN ecosystem report concluded that announcements by dozens of countries to aim for “net-zero” emissions by 2050 could, if fully implemented, limit a global temperature rise to 2.2 C. That’s closer but nevertheless above the less stringent target agreed to in the 2015 Paris climate accord of keeping the temperature increase to well below 2 C compared with pre-industrial times.
But midway by the summit, it was the corporate tax rate rule that was standing out as an accomplishment. It is aimed at preventing multinational companies from stashing profits in countries where they pay few or no taxes.
White House officials say the new tax rate would create at the minimum $60 billion US in new revenue a year in the U.S. — a stream of cash that could help slightly pay for a nearly $3 trillion US social sets and infrastructure package that U.S. President Joe Biden is seeking. U.S. adoption is meaningful because so many multinational companies are headquartered there.
But Civil 20 — which represents some 560 organizations from more than 100 countries, in a network making recommendations to the G20 — was restrained in its praise. The 15 per cent rate is “a simply those [rates] we’d consider fiscal paradises,” Civil 20 official Riccardo Moro told reporters.
Click: See details