Leaders of the world’s 20 largest economies will support a US proposal for a global minimum corporate tax of 15%, draft conclusions from the two-day G20 summit in Rome on Saturday showed.
The G20 plans to have the rules in force in 2023.
“This is more than just a tax deal, it’s a reform of the rules of the global economy,” a senior US official told reporters.
The agreement, which is derived from proposals prepared by the Organization for Economic Co-operation and Development (OECD), is designed to secure tax revenues and offer stability to companies operating across national borders.
“The fact that we 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 when officials arrived in Rome.
The Biden administration had sought a bottom of 21% corporate tax rate, but a rate of 15% still represents a victory for the US heading into next week’s COP26 climate conference in Glasgow. Biden’s domestic plans to reduce CO2 emissions are tied to Washington.
The tax pact is expected to be formally announced on Sunday.
It sets a minimum rate of 15% for large corporate profits, which will increase revenue for most governments and shift the tax burden to the place where companies sell to consumers, not where they are based. International companies will have less opportunity to introduce tax avoidance schemes.
Some nations are expected to benefit more than others. According to the Wall Street Journal, additional revenue from a minimum corporate tax for the United States will be 15 times that of China. A separate report quoted by the Journal estimates that the total boost to 52 developing countries could be around $ 1.5 to $ 2 billion a year, far less than richer countries.
Earlier this month, Biden described the proposals as “unprecedented”.
“Picking the bottom” on corporate tax rates, he said, “has not only hurt American workers, it has also put many of our allies at a competitive disadvantage.”
An agreement, Biden said, would “eliminate incentives to relocate jobs and profits abroad and ensure that multinationals pay their fair share at home. This international agreement is proof that the rest of the world agrees that companies can and should do more to ensure that we build back better. “
Pascal Saint-Amans, a senior tax official at the OECD, told the Journal that “the setback to globalization that we have seen everywhere should also have been a setback to tax multilateralism. But if you want to protect your sovereignty, you need tax co-operation. ”
The proposals still need to be ratified by the participating countries. In the United States, given the path that treaties must take, it may require two-thirds approval in a Senate that is split 50-50 and rarely home to bipartisan cooperation.