Leaders of the world’s 20 largest economies will endorse the US proposal for a 15% global minimum corporate tax, the draft conclusions of the two-day G20 summit in Rome said on Saturday.
The G20 plans to have the rules in effect in 2023.
“It’s more than just a tax deal, it’s an overhaul of the rules of the global economy,” a senior US official told reporters.
The agreement, drawn from proposals developed by the Organization for Economic Co-operation and Development (OECD), is designed to protect tax revenues and provide stability for companies operating across national borders.
“The fact that we have agreed on this new international tax system is good news for all of us, it is clearly a revolution in the international tax system,” French Finance Minister Bruno Le Maire said on Friday. , upon the arrival of officials in Rome.
The Biden administration had called for a 21% corporate tax floor, but a 15% rate still represents a victory for the United States in the run-up to next week’s COP26 climate conference in Glasgow . Biden’s national plans to cut carbon emissions are mired in Washington’s impasse.
The tax pact is expected to be officially announced on Sunday.
It sets a minimum rate of 15% on large business profits, which will generate additional revenue for most governments and shift the tax burden where businesses sell to consumers, not where they are based. International companies will have less leeway to deploy tax evasion schemes.
Some nations should benefit more than others. According to the Wall Street Journal, for the United States, the additional income from a minimum corporate tax will be 15 times that of China. A separate report cited by the Journal estimates that the total boost to 52 developing countries could be around $ 1.5 billion to $ 2 billion per year, far less than richer countries.
The ‘race to the bottom’ in corporate tax rates, he said, “has not only hurt American workers, it has also put many of our allies at a competitive disadvantage.”
A deal, Biden said, “would remove incentives to move jobs and profits overseas, and ensure multinational corporations pay their fair share here at home.” This international agreement is proof that the rest of the world agrees that businesses can and must do more to ensure that we build back better. “
Pascal Saint-Amans, senior tax official at the OECD, told the Journal that “the pullback against globalization that we have seen everywhere should have also been a pushback against fiscal multilateralism. But if you want to protect your sovereignty, what you need is tax cooperation. “
The proposals will still have to be ratified by the participating countries. In the United States, given the route treaties must take, this might require two-thirds approval in a 50-50 split Senate and rarely harbors bipartisan cooperation.