G20 increases pressure on global corporate tax agreements
The world’s largest economy will put pressure this weekend on countries that refuse to sign a global tax reform agreement that will impose minimum taxes on multinational companies.
The G20 economy ministers and central bank governors met on Friday in Venice to discuss the proposal. G7 countries agree Earlier this month, the OECD received support from 130 countries in the talks held in Paris.
They are expected to formally approve the agreement in a communiqué issued after the meeting on Saturday, which will force the world’s largest multinational companies to pay the world’s lowest corporate tax rate.
The OECD proposal also seeks to establish a system under which countries will levy taxes based on part of the profits of large companies.
The draft of the communiqué was leaked on Friday and verified by an official from a G20 country to the Financial Times. The communique urges all countries that adhere to the agreement to make concessions before the leaders of the G20 member states meet in Italy in October .
Officials in several G20 countries said that the exact wording of the communiqué has not been finalized, but an official in a major country said that the G20’s recognition of the agreement would mean “no turning back”.
Eight countries, including Ireland, Barbados, Hungary and Estonia, have postponed agreeing to a 15% minimum tax, which is supported by the United States, China, India and most EU countries. Other adherents include Sri Lanka, Nigeria, Kenya and Saint Vincent and the Grenadines. Some low-tax jurisdictions and investment centers, such as the Bahamas and Switzerland, have signed contracts.
Peru initially did not sign the agreement because it did not have a government in place when the agreement was reached, but it has now done so, and so far there are 131 signatories.
Although the political support of the G20 will provide impetus to efforts to reach a final agreement, which is expected to be implemented in 2023, important technical issues still exist and are unlikely to be resolved this weekend.
These include various so-called “spin-off” agreements, which will allow some countries to use exit agreements to encourage investment.
Another obstacle is expected to be opposition from the Republican Party in the U.S. Congress. President Joe Biden may need Congress to approve at least certain 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 transfers American jobs overseas.”