Finance ministers from the world’s strongest economies have supported a worldwide agreement that will reform how governments tax big companies, clearing the way for approval by heads of state at a summit later this month.
Following a meeting in Washington on Wednesday, the Group of 20 ministers and central bank governors released a statement of support. Five days after, 136 governments reached an agreement that resolved big differences over the level of a global minimum rate and the removal of new digital taxes that the US has deemed discriminatory.
The G-20 explained in its communique that “this agreement will establish a more stable and fair international tax system.”
According to Italian Finance Minister Daniele Franco, whose country leads the G-20 this year. The agreement means that national digital taxes imposed by some governments, including those of Italy and France, will be phased out by 2024.
The G-20 also said in a statement issued on Wednesday that the global economic recovery “remains highly divergent across and within countries and vulnerable to downside risks, particularly the possible spread of new Covid-19 variants and uneven vaccination steps.”
The nations reaffirmed their commitment to using “all available tools” to combat the pandemic’s adverse effects. Finance ministers and central bankers also expressed increased concern about inflation, stating that monetary authorities “are closely monitoring current price dynamics.”
“They will act as necessary to address their mandates, including stable prices,” the G-20 said, “while looking through transitory inflation pressures and remaining committed to clear communication of policy stances.”
Normalization of prices
The long-awaited tax agreement attempts to end what US Treasury Secretary Janet Yellen refers to as a worldwide “race to the bottom” among countries courting companies with ever-lower tax rates.
It also aims to distribute tax revenue from big tech companies like Facebook Inc. and Alphabet Inc.’s Google more equally after some countries placed their digital taxes on them.
The G-20 agreement includes a 15% minimum corporate tax rate and the primary parameters for how much the world’s top 100 multinational businesses would be taxed in more countries: 25% of profits over a 10% margin. The ideas are expected to be approved by G-20 leaders at a meeting in Rome at the end of October.
Source: BNN bloomberg
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