Rome: The landmark international tax deal that won support Saturday at the Group of 20 summit will make international business taxation more equitable and help governments fund their recoveries from the pandemic, the head of the international organization that oversaw the negotiations said.
Mathias Cormann, the secretary-general of the Organization for Economic Cooperation and Development, said that the deal will make our international tax arrangements fairer and work better in a digitalized and globalized economy.
The Paris-based OECD oversaw talks that led to an agreement among 136 countries that is being presented to the G-20 for approval in the closing statement expected Sunday, to be followed by enactment at the national level from 2023.
The deal calls for countries where multinationals are headquartered to enact a global corporate minimum tax of 15%. If their companies' foreign earnings go untaxed or lightly taxed in low-rate countries, the home countries would collect a top-up tax to the minimum.
The global minimum completely eliminates the incentive for businesses around the world to restructure their affairs to avoid tax, Cormann said.
Cormann disagreed with criticism from tax justice advocates and some developing countries that the rate should have been higher, saying the deal was the consensus result of give and take all the way around that included developing countries. A 15% corporate tax rate is 15% more than what we have, he said.
The move was hailed by U.S. Treasury Secretary Janet L. Yellen as benefiting American businesses and workers.
Leaders have expressed broad support for a landmark deal to establish a 15% global minimum corporate tax that aims at deterring multinational countries from using clever accounting to elude taxes by using low-rate havens.
Leaders spoke on the proposal during the opening session Saturday of the summit, said officials from host country Italy. Following formal approval to be reflected in Sunday's closing statement, countries would enact the minimum tax on their own. The idea is that headquarters countries would top up a company's tax to 15% 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 thus be easily shifted to countries offering near-zero taxes in hopes of attracting revenue they otherwise wouldn't have.
A key question is whether the U.S. Congress will pass legislation to comply, since the U.S. is home to 28% of the world's 2,000 largest multinationals.
Finance ministers of Group of 20 countries a few months earlier had agreed on a 15% minimum tax and its formal endorsement at the summit Saturday in Rome of the world's economic powerhouses was widely expected.
Yellen predicted in a statement that the deal on new international tax rules, with a minimum global tax, will end the damaging race to the bottom on corporate taxation.
The summit concludes on Sunday afternoon.
