SYDNEY – Australian Federal Treasurer Josh Frydenberg will chair an international meeting on global corporate tax reform after creating favorable conditions for Australian miners and banks.
Reserve Bank Governor Phillip Lowe will virtually represent Australia on the night of July 9 at the meeting of the Group of 20 (G20) in Venice aimed at introducing a greater corporate tax burden for governments.
The meeting will be the first hybrid virtual and face-to-face meeting of G20 finance ministers and central bank governors since the pandemic began.
It will also be Secretary General Mathias Cormann’s first speech to the G20 as head of the intergovernmental body Organization for Economic Cooperation and Development.
The meeting is expected to advocate a two-pillar approach to international tax reform that has been enforced by 130 countries over the past two years, on terms favorable to Australia.
Reserve Bank Governor Phillip Lowe will join the Treasurer to virtually represent Australia on the night of July 9 at the Venice Group of 20 Sessions aimed at introducing a greater corporate tax burden for governments. (Joel Carrett / AAP Image)
The “fairer and more stable global tax system” will do justice to the resource-rich economy of Australia with an outsourcing for oil, gas and minerals.
The treasurer will welcome the exclusion of “extracts and regulated financial services” from the so-called pillar.
The new approach will change the way income and taxation of rights work in the global economy.
The single-tier pillar aims for greater taxation rights in the legal system in which the consumer and not the manufacturer is based.
The spin-off means that Australia will retain tax rights on profits from Australia’s commodity exports that may have been shifted under Pillar 1 from Australia to market areas such as China – Australia’s largest customer.
“There are strong and principled reasons to exclude these industries. Your exclusion is a critical basis of the agreement, ”says Frydenberg.
Australia has also ensured that this spin-off will not be considered under the seven-year post-implementation review that is expected to be part of the deal.
In another blow against China, he will call on G20 members to promote the open, rules-based trading system and stand behind it.
“The G20 must lead the way in the fight against protectionism and the withdrawal of restrictive trade measures.”
In addition to the health risks of Covid-19 and its variants, the countries will also discuss the significant ongoing economic risks posed by the pandemic.
“We must continue to support the global economy until the recovery takes hold,” he urges his colleagues.
“Higher debt levels around the world remain a key flaw in the global recovery and we must work together to ensure greater debt transparency, which is essential to uncover and remediate vulnerabilities.”
Heavy debt burdens in both the public and private sectors could be the main obstacle to recovery.
The tax agreement provides for the introduction of the new architecture in 2022 and 2023.
The Organization for Economic Co-operation and Development estimates that the combination of Pillar One and Pillar Two could generate an additional 50 to 80 billion euros (80 to 130 billion US dollars) in global tax revenue annually. (Dan Peled / AAP Image)
Changes to the second pillar are designed to help Australia attract and retain investment by reducing the spread between countries’ tax rates on multinational companies.
The second pillar brings the global minimum tax to at least 15 percent, as the heads of state and government of the G7 agreed in Cornwall last month.
The Organization for Economic Co-operation and Development estimates that the combination of pillar one and pillar two could generate an additional 50 to 80 billion euros ($ 94.75 billion) in global tax revenue annually.
Changes to the first pillar are a series of proposals to revise the rules for tax sharing in a changed economy, aimed at taxing the residual profits of multinational corporations within the jurisdiction from which the revenues originate. The proposals for the first pillar will not be limited to highly digitized business models and are intended to have a much broader scope by linking the taxation rights of companies to their source of income.
The second pillar aims to create a level playing field on the world market by granting four new legal systems additional taxation rights when either income is subject to a low tax rate or where primary taxation rights are not exercised. These rules include the Income Inclusion Rule, the Undertaxed Payment Rule, the Subject to Tax Rule and the Switch-over Rule.
(Edited by Vaibhav Pawar and Krishna Kakani)