Venice, Italy, Jul 10 (EFE).- Finance ministers and central bank governors of the G20 nations achieved consensus on a proposal to change the way multinational corporations are taxed, participants said Saturday at the conclusion of a two-day meeting here.
“We have achieved a historic agreement on a more stable and fairer international tax architecture. We endorse the key components of the two pillars on the reallocation of profits of multinational enterprises and an effective global minimum tax,” the officials said in a communique.
The “two pillars” approach is outlined in a report from the Organization for Economic Cooperation and Development (OECD) that already has backing from the vast majority of the 139 jurisdictions making up the OECD/G20 Inclusive Framework.
More than 130 countries, including the United States, have endorsed the idea of a 15 percent minimum tax on multinationals, which, according to the OECD, could translate into $150 billion a year in additional revenue for governments.
Besides seeking to put a floor under competition among countries to offer the lowest corporate tax rates, the OECD proposal would re-allocate taxation rights over multinational companies based on where they operate regardless of legal domicile.
The accord reached in Venice shows “the world is ready to end the global race to the bottom on corporate taxation,” US Treasury Secretary Janet Yellen said.
Acknowledging that a number of nations remain resistant to joining the initiative, she said that while the G20 will continue trying to persuade the holdouts, “it’s not essential that every country be on board.”
“This agreement contains a kind of enforcement mechanism that can be used to make sure that countries that are holdouts are not able to undermine the operation of this global agreement,” Yellen said.
Germany’s finance minister, Olaf Scholz, noted Saturday that the world has “very little time” to meet the current target of implementing the measure by 2023.
“There is no turning back,” French Finance Minister Bruno Le Maire said. “It will be implemented and we will have built this international taxation system for the 21st century.”
In the section of the communique that addresses climate change, the G20 officials advocate using a “wide set of tools” that includes the “phasing-out of inefficient fossil fuel subsidies that encourage wasteful consumption and, if appropriate, the use of carbon pricing mechanisms and incentives.” EFE