Leaders at the Group of 20 summit in Rome on Saturday formally endorsed a new global corporate minimum tax intended to blunt the ability of multinational businesses to reap huge profits in countries where they pay few if any taxes.
The new global minimum tax of 15 percent, backed by leaders of the world’s biggest economies, could help governments find more money for social spending programs. The new minimum tax rate is to be applied to firms with at least $850 million in annual revenue and could raise $150 billion a year in additional tax revenue worldwide, according to the Organization for Economic Cooperation and Development, which brokered the tax agreement.
In July, G-20 finance ministers agreed to the minimum tax rate. A month earlier, finance ministers from the Group of Seven wealthy democracies approved of the effort to recoup a greater portion of income that multinational businesses stash away in low-rate nations and tax havens. The deal represents a breakthrough in a long attempt to overhaul international corporate tax laws and force some of the world’s biggest companies to pay taxes in nations where their goods or services are sold even if they have no physical offices there.
An international tax treaty also requires approval by U.S. Congress and other parliaments to take effect. It has been a priority of U.S. Treasury Secretary Janet Yellen, and U.S. President Joe Biden’s support for it helped clinch the deal. “Today, every G-20 head of state endorsed an historic agreement on new international tax rules, including a global minimum tax that will end the damaging race to the bottom on corporate taxation,” Yellen said. “It’s a critical moment for the U.S. and the global economy.”
Biden, who had called for a 21 percent minimum tax, said G-20 leaders whose nations represent 80 percent of the global GDP “made clear their support for a strong global minimum tax. This is more than just a tax deal — it’s diplomacy reshaping our global economy and delivering for our people.” European nations, however, have particularly been upset with major tech companies such as U.S. heavyweights Amazon, Apple, Facebook and Google that collect revenue without paying more in taxes. German Chancellor Angela Merkel called the deal a “clear signal of justice in times of digitalization.”
Civil 20, a platform for hundreds of civil society-minded organizations to engage with the G-20, criticized the deal’s exclusion of some nations. “All countries have to be at the table,” it said. “We need higher minimal tax rates for corporations, fair distribution of tax revenue, and a U.N. Tax Convention to make that happen.”
The G-20 members are: Argentina, Australia, Brazil, Britain, Canada, China, the E.U., France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the United States.