G20 finance ministers support global reform to end tax havens
Top finance officials representing most of the world's economy have backed a sweeping revision of international taxation that includes a 15 percent global minimum corporate levy to deter big companies from resorting to low-rate tax havens.
Finance ministers from the Group of 20 countries endorsed the plan at a meeting on Saturday in Venice.
US Treasury Secretary Janet Yellen said the proposal would end a "self-defeating international tax competition" in which countries have for years lowered their rates to attract companies. She said that had been "a race that nobody has won. What it has done instead is to deprive us of the resources we need to invest in our people, our workforces, our infrastructure."
The next steps include more work on key details at the Paris-based Organization for Economic Cooperation and Development and then a final decision at the Group of 20 meeting of presidents and prime ministers on October 30-31 in Rome.
Implementation, expected as early as 2023, would depend on action at the national level. Countries would enact the minimum tax requirement into their own laws. Other parts could require a formal treaty. The draft proposal was approved July 1 in talks among more than 130 countries convened by the OECD.
Italy hosted the finance ministers' meeting in Venice because it holds the rotating chair of the G20, which makes up more than 80 percent of the world economy.
The event also attracted around 1,000 protesters under the banner "We Are The Tide," an umbrella group of environmental and social justice activists, including opponents of large cruise ships and the hordes of tourists they bring to the lagoon city.
The US already has a minimum tax on overseas earnings, but President Joe Biden has proposed roughly doubling the rate to 21 percent, part of a broader proposal to fund Biden's jobs and infrastructure plan by raising the domestic corporate tax rate to 28 percent from 21 percent.
Yellen said she was "very optimistic" that Biden's infrastructure and tax legislation "will include what we need for the United States to come into compliance" with the minimum tax proposal.
Republicans in the Congress have expressed opposition to the measure.
The proposal aims to deter the world's biggest firms from using accounting and legal schemes to shift their profits to countries where little or no tax is due – and where the company may do little or no actual business. Under the plan, companies that escape taxes abroad would pay at home – eliminating incentives for using tax havens or for setting them up.
From 2000-2018, US companies booked half of all foreign profits in seven low-tax jurisdictions: Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland.