Attendees will attend the G20 high-level tax symposium during the meeting of G20 finance ministers and central bank governors in Venice, Italy, on July 9, 2021. [Photo/Agencies]
Finance ministers and central bank governors of the G20 economies reached a historic agreement over the weekend on a new global corporate tax reform plan that advocates a minimum tax on multinational corporations and a redistribution of profits between countries.
After years of discussion, it was a big step forward in the global tax reform process. After the G20 concluded their meeting in Venice, Italy on Saturday, they released a communique calling the new framework “a more stable and fairer international tax architecture”. However, the minimum corporate tax rate has not been set.
Earlier this month, the global corporate tax reform initiative, which was designed as a two-pillar solution and proposed a minimum tax rate of 15 percent for large multinational corporations, received support from 132 countries and jurisdictions, including China. Experts believe that the final plan could be approved at the next G20 meeting in October.
“This shows that great progress has been made in reforming the international corporate tax system,” said Jeff Yuan, director of transfer pricing services for PwC in the Asia-Pacific region.
“However, the final plan is still fraught with uncertainties and we are unsure when a global consensus can be reached as there is still a significant amount of political and technical work to be completed and important design issues to be resolved by October 2021. ” . “
China’s strong economic fundamentals and institutional advantages can ensure the country takes the lead in global tax reform, said Bai Yanfeng, a professor at Beijing’s Central University of Finance and Economics.
Compared to some advanced economies, which may take longer to implement, China can act more effectively. As China becomes the world’s largest single consumer market, the country will also maintain its advantages in attracting international capital, Bai said.
“The most important thing is to do our own things well. If China’s companies are competitive enough and consumers from all over the world pay more attention to products made in China, we will have confidence in both market share and tax share. ” said Bai.
Yuan said a July 1 statement by the Organization for Economic Co-operation and Development and the G20 communiqué made it clear that in implementing the new international tax rules, countries will abolish taxes on digital services and other similar measures imposed by companies . These moves are good news for multinational companies, especially high-tech companies, Yuan said.
The new rules and their possible effects require further analysis. Multinational companies need to do more impact analysis and scenario planning, based on the information in the OECD statement, and reconsider options to mitigate the potential impact of the new regulations, he said.
Yi Gang, Governor of the People’s Bank of China, the central bank, attended the G20 meeting on Friday and Saturday via video conference. Yi announced that the G20 Working Group on Sustainable Finance, jointly chaired this year by the Chinese Central Bank and the US Treasury Department, is working on a draft sustainable finance plan in the medium term.
This year, the group will focus on tasks such as green finance and green industries, streamlining information disclosure and reporting standards on climate and the environment, and multilateral development in support of the Paris Agreement, according to a statement by the PBOC.
Yi called on G20 members to work together to improve standards for classifying and assessing environmental, social and governance investments and improving climate information, which will help promote global green financial markets and promote a low-carbon transition .
Central bank digital currencies for cross-border payments were also discussed at the G20 meeting. It stressed that no so-called “global stablecoins” – a new type of crypto-asset intended to maintain a stable value in relation to certain assets – should not start operating until all relevant legal, regulatory and supervisory requirements are adequately met it in the communique.