The world’s largest economies will put pressure on angry nations this weekend to refuse to sign a global tax reform agreement that would impose a minimum levy on multinational corporations.
On Friday, G20 economy ministers and central bankers met in Venice to discuss the proposal, which was agreed by the G7 nations last month and supported by 130 countries in the negotiations organized by the OECD in Paris earlier this month.
They are expected to formally approve the agreement, which will force the world’s largest multinationals to pay a minimum global tax rate, in a statement to be released Saturday after the meeting.
The OECD proposal also seeks to establish a system under which countries would impose certain reserved profits on large companies based on where they were generated.
A draft of the communiqué, which was leaked on Friday and verified to the Financial Times by a G20 official, urges all countries that have the agreement to grant it at a time when the leaders of the member countries of the G20 meets in Italy in October.
The precise wording of the communiqué has not yet been finalized, say officials from several G20 countries, but an official from a large country said approval of the agreement by the G20 would mean “there was no further return”.
Eight countries, including Ireland, Barbados, Hungary and Estonia, have agreed to the minimum 15 per cent levy, which is supported by the United States, China, India and most EU countries. Other attractions include Sri Lanka, Nigeria, Kenya and St Vincent and the Grenadines. Some low-rate jurisdictions and investment centers, such as the Bahamas and Switzerland, are already established.
Peru did not sign at the outset because it did not have a government in place when the agreement was made but has now done so, making 131 signatories so far.
While the G20’s political approval will give a boost to efforts to reach a final agreement, which is expected to be put in place by 2023, important technical issues remain and are unlikely to be resolved this weekend.
These include various so-called “carve-out” agreements that allow certain countries to use the waivers of the agreement to encourage investment.
Another obstacle is predicted to be Republican opposition in the United States Congress; President Joe Biden probably needs Congressional approval for at least some elements of the proposal.
Kevin Brady, the first Republican on the House and Representatives committee on ways and means, described the deal as “a dangerous economic return that sends American jobs overseas.”