G20: Finance ministers meet to discuss global tax reform
July 9, 2021
The Italian city of Venice is set to host a summit of finance ministers and central bankers from the G20 countries on Friday.
Top of the agenda is implementing a global tax reform, spearheaded by the US Treasury Secretary Janet Yellen. The initiative proposes a minimum corporate income tax of 15%.
Some 130 countries already backed the plan, brokered by the Paris-based Organization for Economic Cooperation and Development (OECD).
The minimum tax rate would bring in an estimated $150 billion (€127 billion) in additional tax revenues globally.
Who benefits most from tax reform?
The G20 members, which comprise the world's largest economies and account for over 80% of global GDP, are expected to be the main winners from the planned tax reform.
Tax havens that slashed their corporate taxes to incentivize multinational companies to set up headquarters there would lose out the most.
Nevertheless, many such states have signed up, including Panama and Bermuda.
Countries will have until the end of 2023 to put the proposed tax reform into law. But ministers may question the ability of the US government to get such a proposal through the hotly divided US Congress where Republicans have already fought against US President Joe Biden's domestic tax plans.
Pockets of resistance
Some EU countries, such Ireland, Estonia and Hungary are also holding back.
Pascal Saint-Amans, Director of Tax Policy at the OECD told DW that success hinges on the EU's approval. While not all member countries have signed up yet, France and Germany have pushed for significant reform for many years.
Blocking approval in the EU may cause problems, but Saint-Amans is confident, pointing out that not all countries' consent is necessary for the minimum to become effective. As long as the world's biggest economies are on board, the most powerful companies residing there will be taxed.
Ireland has clashed with other EU countries over digital companies such as Google and Facebook who have their European headquarters in Ireland. France and Germany complain that digital giants are not paying their fair share in tax due to low Irish tax rates.
German Finance Minister Olaf Scholz said on Friday that it was not necessary for all countries to sign up to the deal.
"I am convinced that in the end, we will come to a joint decision in the EU," he told public broadcaster Deutschlandfunk.
Global minimum carbon price
Yellen also spoke before the meeting in Venice, calling on the other participating countries to decarbonize their economies.
The G20 states "are responsible for 80 percent of global carbon emissions, so it is our responsibility to take action — and do so immediately," she said.
French Finance Minister Bruno Le Maire also spoke on the topic, suggesting a minimum carbon price, calling it a "global floor."
"I think a global floor could be a very good starting point to have all the G20 member states committed on a carbon price," he said.
The current average carbon price is just $3 per ton and the vast majority of emissions are not priced at all.
ab/sms (dpa, Reuters, AFP)