sUnder the Italian presidency, the top financiers of the nineteen richest countries in the world and the European Union are meeting face to face for the first time since they met in February 2020 in Riyadh, at the start of the coronavirus pandemic.
The G20 countries have already committed to the broad framework for reform under the auspices of the Organization for Economic Cooperation and Development (OECD) on July 1, but now they must publish a “political agreement” for ratification.
According to a draft press release still under discussion in Venice and obtained by AFP, G20 finance ministers must “approval” to this “historic agreement on a more stable and equitable international tax structure”.
This reform, which has been negotiated for years, focuses on two pillars: the creation of a global minimum rate and a system aimed at distributing taxes to multinational corporations more equitably according to the profits made in each country, regardless of its creation.
This last section relates mainly to the giant Internet companies, the famous Gafa (Google, Amazon, Facebook and Apple), which tend to practice tax optimization by setting up their headquarters where taxes are low.
Invitation to mobilize
The ministers are also expected to make an appeal to the rebellious nations, as the declaration has so far been signed by 131 out of 139 members of the so-called “comprehensive framework” working group of the Organization for Economic Cooperation and Development, which brings together developed and emerging countries.
The first G7 agreement at the beginning of June in London gave a boost to the negotiations, bogged down during Donald Trump’s presidency and revived with the arrival of Joe Biden in the White House.
British Finance Minister Rishi Sunak, whose country holds the G7 presidency, on Friday called on his G20 counterparts to “mobilize” and “ensure that the final details of the agreement are settled by October.”
Several countries, including France, the United States and Germany, are campaigning for a rate above 15%, but they shouldn’t budge until the next G20 meeting in October.
“France will fight very hard to get the minimum tax to be higher than 15%,” French Economy Minister Bruno Le Maire told AFP.
But is this really the end of tax havens? Some experts remain skeptical, such as Giuliano Nossi, professor of strategy at Milan’s Polytechnic.
“The rates set by different countries can always vary greatly, so tax optimization will remain at the heart of the strategy of tech giants and other multinationals,” he told AFP.
Support poor countries
The G20 should also support the IMF’s initiative to increase aid to the most vulnerable countries, in the form of a new issuance of Special Drawing Rights (SDRs) in the amount of US$650 billion.
This increase in reserves, “the highest in the history of the International Monetary Fund, is a breath of fresh air for the world,” said fund manager, Kristalina Georgieva. It should be in effect by the end of August.
G7 leaders announced in June that they want to mobilize $100 billion from this cause to help disadvantaged countries, especially in Africa, recover from the pandemic.
According to the draft press release, the G20 is calling for “contributions from all countries in a position to do so to achieve an ambitious goal in favor of vulnerable countries,” without specifying an amount.
UN Secretary-General Antonio Guterres on Friday welcomed the increase in IMF reserves and urged G20 members to “solidate” with developing countries.
“Solidarity calls on rich countries to direct the unused portion of these funds to developing countries, including vulnerable middle-income countries and small developing islands,” he said.
Another topic on the agenda, climate change. US Treasury Secretary Janet Yellen called on her G20 counterparts to take “immediate” action to “decarbonize the global economy,” the “key challenge for international policy.”