The world’s largest economies have thrown their weight behind a global tax reform deal that would impose a minimum levy on multinational corporations, ramping up pressure on a small number of holdout countries to sign up to the agreement.
G20 economy ministers and central bankers meeting in Venice on Saturday issued a joint communique endorsing the tax deal, which was agreed by G7 nations last month and backed by 130 countries at talks hosted by the OECD in Paris earlier this month.
The communique said that the deal was “a historic agreement on a more stable and fairer international tax architecture” and the G20 invited “all members of the OECD . . . that have not yet joined the agreement to do so”.
It called on all countries in the negotiations to “swiftly address the remaining issues and finalise the design elements” by the next G20 meeting in October.
Janet Yellen, US treasury secretary, said that the G20 would try to bring small holdout countries, which include Ireland and Hungary, towards accepting the agreement but this was not essential to moving forward.
“It’s not essential that every country be on board,” she said.
Bruno Le Maire, French finance minister, called the tax deal “a once in a century tax revolution”.
“The reform of international taxation has been agreed and there is no turning back,” he said.
The next steps for the October G20 meeting will be to fix a globally agreed minimum tax rate and work out how shares of profits from taxation will be allocated between countries.
Eight countries, including Ireland, Barbados, Hungary and Estonia, have held off on agreeing the 15 per cent minimum levy, which is backed by the US, China, India and most EU countries. Other holdouts include Sri Lanka, Nigeria, Kenya and St Vincent & the Grenadines.
Some low-tax jurisdictions and investment hubs, such as the Bahamas and Switzerland, have already signed up.
Peru did not originally sign up because it did not have a government in place when the agreement was made but has now done so, making 131 signatories.
While the political endorsement of the G20 will provide an impetus to efforts to reach a final deal, which is expected to implemented by 2023, important technical issues remain and are unlikely to be resolved this weekend.
These include various so-called carve-out agreements which would let some countries use opt-outs from the deal to encourage investment.
Another hurdle is expected to be Republican opposition in the US Congress; President Joe Biden is likely to need Congressional approval for at least some elements of the proposal.
Kevin Brady, the top Republican on the House of Representatives’ ways and means committee, has described the deal as “a dangerous economic surrender that sends US jobs overseas”.