The world’s largest economies will this weekend pile pressure on to holdout nations which are refusing to sign up to a global tax reform deal that would impose a minimum levy on multinational corporations.
G20 economy ministers and central bankers met in Venice on Friday to discuss the proposal, which was agreed by G7 nations last month and backed by 130 countries at talks hosted by the OECD in Paris earlier this month.
They are expected to formally endorse the agreement, which will force the world’s largest multinationals to pay a global minimum corporate tax rate, in a communiqué to be released on Saturday after the meeting.
The OECD proposal also seeks to establish a system under which countries would tax some profits booked by large companies based on where they were generated.
A draft of the communiqué, which was leaked on Friday and verified to the Financial Times by an official from a G20 nation, urges all countries holding out on the deal to concede by the time the leaders of G20 member countries meet in Italy in October.
The precise wording of the communiqué has yet to be finalised, officials from several G20 countries said, but an official from one large country said the endorsement of the deal by the G20 would mean “there was no going back”.
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 so far.
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”.