Leaders of the world’s 20 major economies have approved a global minimum corporate tax rate of at least 15 percent, which will come into force in 2023. The tax is aimed at preventing multinational companies from taking advantage of complacent tax regimes and not paying taxes where they operate.
The tax deal, which was proposed by the United States (US), is expected to be officially adopted on Sunday, according to Reuters news agency, and will be enforced by 2023. The US Treasury Secretary Janet Yellen said the historic agreement was a “critical moment” for the global economy and will “end the damaging race to the bottom on corporate taxation”.
She wrote on Twitter that US businesses and workers would benefit from the deal even though many US-based mega-companies would have to pay more tax. “Today, every G20 head of state-endorsed a historic agreement on new international tax rules, including a global minimum tax that will end the damaging race to the bottom on corporate taxation,” said Yellen.
Opening the G20 summit, Mario Draghi, Italian prime minister, said the success of COVID-19 vaccines and efforts to stimulate economic recovery showed there is reason for optimism. He described the tax deal as “a historic agreement for a fairer and more effective international tax system. We call on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting to swiftly develop the model rules and multilateral instruments as agreed in the Detailed Implementation Plan, with a view to ensure that the new rules will come into effect at (the) global level in 2023,” the draft conclusions, seen by Reuters, reads.
The conclusions are to be formally adopted on Sunday. The G20 summit comes ahead of the much-anticipated COP26 summit on climate change in Glasgow which begins on Monday. What happens at the G20 may set the tone for COP26, with sharp divisions remaining between countries on their commitments to tackling climate change.