ROME – The leaders of the world’s largest economies on Saturday approved a global minimum tax on corporations, a linchpin of new international tax rules aimed at softening the edge of tax havens amid skyrocketing profits from some multinational corporations.
The move at the Rome Summit of the Group of 20 was welcomed by Treasury Secretary Janet L. Yellen as a benefit to American businesses and workers.
The G20 finance ministers had already agreed on a minimum tax of 15% in July. It was waiting for the formal confirmation of the summit in Rome on Saturday by the world’s economic powers.
Yellen said in a statement that the agreement on new international tax rules with a global minimum tax “will end the harmful race to the bottom in corporate taxation.”
The deal fell short of US President Joe Biden’s original call for a minimum tax of 21%. Even so, Biden tweeted his satisfaction.
“Here at the G20, leaders who represent 80% of global GDP – allies and competitors alike – have shown their support for a strong global minimum tax,” the president said in the tweet. “This is more than just a tax treaty – it is diplomacy that is reshaping our global economy and bringing something to our people.”
The deal aims to deter multinational corporations from hiding profits in countries where they pay little or no taxes. Nowadays, multinational companies can make huge profits from things like brands and intellectual property. These companies can then allocate profits to a subsidiary in a tax haven country.
“There is good news here. The global community has agreed on a minimum taxation for companies. This is a clear signal for justice in the age of digitization.”
Mathias Cormann, Secretary General of the Paris Organization for Economic Cooperation and Development, said that the deal made in Rome “will make our international tax regime fairer and function better in a digitized and globalized economy”.
The minimum rate “completely removes the incentive for companies worldwide to restructure their businesses to avoid taxes,” said Cormann.
On other issues vital to fairness around the world – including access to COVID-19 vaccines – the summit heard appeals on the first of its two days to increase the percentage of those in poor countries who are vaccinated.
The Italian Prime Minister Mario Draghi has decided to speed up vaccines in poor countries.
Draghi, the host of the summit, said on Saturday that only 3% of people in the world’s poorest countries have been vaccinated, while 70% in rich countries have received at least one vaccination.
“These differences are morally unacceptable and undermine global recovery,” said Draghi, economist and former head of the European Central Bank.
French President Emmanuel Macron has pledged to use the summit to urge his European Union counterparts to be more generous in donating vaccines to low-income countries.
However, civil society advocates who have held talks with G-20 officials said suspending vaccine patents is critical to improving access in poor countries.
Canada found it both shared vaccines and donated money to develop production in South Africa, a G-20 country. Chrystia Freeland, Deputy Prime Minister, said Canada is increasing its commitment to international vaccine exchanges through the COVAX program by donating 200 million doses.
The summit is also facing a two-pronged global recovery, with rich countries recovering faster.
Rich countries have used vaccines and stimulus spending to revive economic activity, which risks leaving developing countries, which account for much of global growth, behind due to poor vaccination and funding difficulties.
Macron told reporters he expected the G-20 to approve an additional $ 100 billion to support African economies.
Regarding the pressing problem of climate change, Italy hopes the G-20 will receive important pledges from countries responsible for around 80% of global CO2 emissions – ahead of the UN climate change conference that will be held in Glasgow, Scotland on Sunday as the summit of Rome begins winding down.
Most of the G-20 leaders will travel to Glasgow.
Presidents Vladimir Putin of Russia and Xi Jinping of China, whose emissions reduction efforts are paramount to tackling climate change, attended the Rome summit remotely.
But in the middle of the summit, the corporate tax rate regime dominated.
White House officials say the new tax rate would create at least $ 60 billion in new revenue annually in the U.S. – a flow of money that could help partially pay for a nearly $ 3 trillion welfare and infrastructure package that Biden is aiming to achieve. Adoption in the United States is critical because so many multinational companies are headquartered there.
But Civil 20, which represents around 560 organizations from more than 100 countries in a network that makes recommendations to the G-20, was less enthusiastic. The 15 percent rate is “a little more than what we would call tax havens,” Riccardo Moro, Civil 20 official, told reporters after the summit.
Nicole Winfield contributed to this report.