The world’s largest economies have thrown their weight behind a global tax reform deal that would impose a minimum levy on multinational corporations, ramping up pressure on a small number of holdout countries to sign on to the agreement.
G20 economy ministers and central bankers meeting in Venice on Saturday issued a joint communiqué endorsing the tax deal, which was agreed by G7 nations last month and backed by 130 countries at talks hosted by the OECD in Paris.
The communiqué called the deal “a historic agreement on a more stable and fairer international tax architecture” and the G20 invited “all members of the OECD . . . that have not yet joined the agreement to do so”.
It called on all countries in the negotiations to “swiftly address the remaining issues and finalise the design elements” by the next G20 meeting in October.
Janet Yellen, US Treasury secretary, said that the G20 would try to bring the holdouts, which include Ireland and Hungary, towards accepting the agreement, but added that their assent was not needed to move forward.
“It’s not essential that every country be on board,” she said. But she hailed the G20’s progress, saying in a statement at the conclusion of the summit that “the world is ready to end the global race to the bottom on corporate taxation, and there’s broad consensus about how to do it”.
Bruno Le Maire, France’s finance minister, called the tax deal “a once in a century tax revolution”.
“The reform of international taxation has been agreed and there is no turning back,” he said.
The next steps for the October G20 meeting will be to fix a globally agreed minimum tax rate and work out how shares of profits from taxation will be allocated between countries.
Eight countries, including Ireland, Barbados, Hungary and Estonia, have deferred agreeing the 15 per cent minimum levy, which is backed by the US, China, India and most EU countries. Other holdouts include Sri Lanka, Nigeria and Kenya.
Some low-tax jurisdictions and investment hubs, such as the Bahamas and Switzerland, have already signed on.
Peru did not originally join the agreement because it did not have a government in place but it has now done so. The tally of signatories stands at 132 countries.
Yellen also expressed optimism about the discussion’s advances on issues including climate change and responding to the Covid-19 pandemic, and set a target for the G20 to commit to $100bn in special drawing rights in October to supplement the IMF’s $650bn facility, announced on Friday, to bolster developing nations’ finances.
“We know this won’t be the last global health crisis,” she said on Sunday. “As long as the virus continues to spread, we’re all still at risk.”
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While the political endorsement of the G20 will provide an impetus to efforts to reach a final deal, which is expected to be implemented by 2023, important technical issues remain and are unlikely to be resolved this weekend.
These include various carve-out agreements that would let some countries use opt-outs from the deal to encourage investment.
Another hurdle is expected to be Republican opposition in the US Congress; President Joe Biden is likely to need Congressional approval for at least some elements of the proposal.
Kevin Brady, the top Republican on the House of Representatives Ways and Means committee, has described the deal as “a dangerous economic surrender that sends US jobs overseas”.