The leaders of the world’s 20 largest economies have approved a 15% global minimum tax on large multinational corporations.
They will officially adopt the new rules during the continuation of the G20 summit in Rome on Sunday.
Joe Biden, the President of the United States who is in the Italian capital for the talks, called the tax deal a “game changer.”
“Here at the G20, leaders representing 80% of global GDP – allies and competitors alike – have clearly expressed their support for a strong global minimum tax,” Biden said in a tweet on Saturday.
âIt’s more than just a tax deal – it’s diplomacy that is reshaping our global economy and serving our people. “
The tax rules, which are part of a reform plan signed by nearly 140 countries, will make it harder for multinational companies – including giants like Google, Amazon, Facebook, Microsoft or Apple – to avoid taxation by establishing offices in low tax jurisdictions.
The rules will also aim to end decades of tax competition between governments to attract foreign investment.
US Treasury Secretary Janet Yellen hailed the G20’s approval of the tax deal as âhistoricâ, while German Chancellor Angela Merkel called it âa great successâ.
“There are good things to report here,” Merkel told reporters on Saturday. âThe global community has agreed to minimum corporate taxation. This is a clear signal of justice in the age of digitization.
Reuters news agency, citing a draft statement, said the G20 wanted the rules to be in effect in 2023.
The Organization for Economic Co-operation and Development (OECD), which led the tax negotiations, estimates that the minimum tax will generate an additional $ 150 billion in global tax revenue each year.
It says the rights to tax over $ 125 billion in profits will also shift to countries where they are earned from low-tax countries where they are currently accounted for.
Mathias Cormann, Secretary General of the OECD, said the Rome deal “will make our international tax arrangements fairer and work better in a digitized and globalized economy”.
The minimum rate “completely removes the incentive for companies around the world to restructure their businesses to avoid tax,” he said, saying it would also provide “significant benefits to countries around the world, including and in particular to developing countries “.
But Civil 20, which represents some 560 organizations from more than 100 countries in a network making recommendations to the G20, was less enthusiastic.
The 15% rate is “a little more than those (rates) that we would consider tax havens,” Civil 20 manager Riccardo Moro told reporters.
On other issues critical to equity across the world – including access to COVID-19 vaccines – the summit on the first of its two days heard calls to increase the percentage of people in poor countries being vaccinated .
Italian Prime Minister Mario Draghi urged to speed up the pace of vaccine delivery to poor countries.
Draghi, the summit’s host, said on Saturday that only three percent of people in the world’s poorest countries are vaccinated, while 70 percent in rich countries have had at least one injection.
âThese differences are morally unacceptable and undermine the global recovery,â Draghi said.
The Rome summit is the first face-to-face gathering of leaders since the start of the COVID-19 pandemic, and while the first day of discussions focused primarily on health and the economy, climate and the environment are at the top of Sunday’s agenda. .
The G20 bloc accounts for around 80 percent of global greenhouse gas emissions that scientists say must be sharply reduced to avoid a climate catastrophe.
For this reason, this weekend’s rally is seen as an important stepping stone towards the United Nations ‘COP26’ climate summit attended by nearly 200 countries, in Glasgow, Scotland, where most of the G20 leaders will fly directly from Rome.
Italy hopes the G20 will secure crucial commitments from countries responsible for around 80% of global carbon emissions.
But the draft final statements from the G20 suggest the group will fall short of its firm commitment to achieve “net” emissions by 2050.
The mid-century target date is a goal that UN experts say is necessary to cap global warming at 1.5 degrees Celsius, which is seen as the limit to avoid a dramatic acceleration of extreme events such as than droughts, storms and floods.
The world’s largest carbon emitter, China, is aiming for net zero in 2060, while other major polluters such as India and Russia have also failed to commit to meeting the mid-market deadline. century.
Russian Presidents Vladimir Putin and Chinese Presidents Xi Jinping participated remotely in the Rome summit.