G20 endorses global corporate minimum tax, discusses COVID-19 vaccines and economic recovery at Rome summit

Leaders of the world's biggest economies have endorsed a global minimum tax on corporations, a linchpin of new international tax rules aimed at blunting the edge of fiscal paradises amid skyrocketing profits of some multinational businesses

G20 finance ministers in July had already agreed on a 15 per cent minimum tax, and the plan has been awaiting formal endorsement at the summit of the world's economic powerhouses on Saturday, local time, in Rome.

It comes after 136 countries in October reached a deal on a minimum tax on global corporations — including internet giants such as Google , Amazon, Facebook, Microsoft and Apple — to make it harder for them to avoid taxation by establishing offices in low-tax jurisdictions.

In a statement, US Treasury Secretary Janet Yellen said that the deal on new international tax rules, with a minimum global tax, "will end the damaging race to the bottom on corporate taxation".

The move by the Group of 20 summit in Rome fell short of US President Joe Biden's original call for a 21 per cent minimum tax.

However, Mr Biden tweeted his satisfaction at the deal.

"Here at the G20, leaders representing 80 per cent of the world's GDP — allies and competitors alike — made clear their support for a strong global minimum tax," Mr Biden said in the tweet.

"This is more than just a tax deal — it's diplomacy reshaping our global economy and delivering for our people."

Tax deal 'completely eliminates' incentive to avoid tax: OECD

The agreement aims to discourage multinationals from stashing profits in countries where they pay little or no taxes.

These days, multinationals can earn big profits from things such as trademarks and intellectual property.

Then these companies can assign earnings to a subsidiary in a tax haven country.

Briefing reporters midway through the summit, German Chancellor Angela Merkel said: "There are good things to report here. The world community has agreed on a minimum taxation of companies. That is a clear signal of justice in times of digitalisation."

Mathias Cormann, secretary-general of the Paris-based Organization for Economic Cooperation and Development (OECD), said the deal clinched in Rome would "make our international tax arrangements fairer and work better in a digitalised and globalised economy".

The minimum rate "completely eliminates the incentive for businesses around the world to restructure their affairs to avoid tax", Mr Cormann contended.

On other issues crucial to fairness across the globe — including access to COVID-19 vaccines — the summit on the first of its two days heard pleas to boost the percentage of those in poor countries being vaccinated.

Italian Premier Mario Draghi made a sharp call to pick up the pace in getting vaccines to poor countries.

Mr Draghi, the summit host, said on Saturday that only 3 per cent of people in the world's poorest countries were vaccinated, while 70 per cent in rich countries have had at least one shot.

"These differences are morally unacceptable and undermine the global recovery," said Mr Draghi, an economist and former chief of the European Central Bank.

French President Emmanuel Macron has pledged to use the summit to press fellow European Union leaders to be more generous in donating vaccines to low-income countries.

However, advocates of civil society that have held discussions with G20 officials said suspension of vaccine patents was crucial to increasing access in poor countries.

Canada noted it was both sharing vaccines as well as donating money to develop production in South Africa, which is a G20 country.

Chrystia Freeland, Canada's deputy prime minister, said Canada was increasing its commitment to international vaccine sharing through the COVAX program by donating 200 million doses.

The summit is also confronting two-track global recovery in which rich countries are bouncing back faster.

Rich countries have used vaccines and stimulus spending to restart economic activity, leaving the risk that developing countries that account for much of global growth will remain behind due to low vaccinations and financing difficulties.

Mr Macron has told reporters he expects the G20 to confirm an additional $US100 billion ($132.9 billion) to support Africa's economies.

US expects billions in revenue

On the urgent problem of climate change, Italy is hoping the G20 will secure crucial commitments from countries responsible for about 80 per cent of global carbon emissions, ahead of the UN climate conference that begins on Sunday in Glasgow, Scotland, just as the Rome summit winds down.

Most of the G20 leaders will head to Glasgow. 

Presidents Vladimir Putin of Russia and Xi Jinping of China, whose efforts to reduce emissions are paramount to combating climate change, were participating remotely in the Rome summit.

However, midway through the summit it was the corporate tax rate rule that dominated.

White House officials say the new tax rate would create at least $79.79 billion in new revenue a year in the US, a stream of cash that could help partially pay for a nearly $3.98 trillion social services and infrastructure package that Mr Biden is seeking.

US adoption is key because so many multinational companies are headquartered there.

However, Civil 20, which represents some 560 organisations from more than 100 countries in a network making recommendations to the G20, was less enthusiastic.

The 15 per cent rate is "a little more than those [rates] we'd consider fiscal paradises", Civil 20 official Riccardo Moro told reporters following the summit.

Source https://www.abc.net.au/