G20 Leaders Approve International Tax Reform
Sylvie Claire / October 31, 2021
Today, all G20 leaders approved a historic agreement on new international tax rules, including a global minimum tax, that will end the race to the bottom in corporate taxation, announced U.S. Treasury Secretary Janet Yellen in a statement.
The green light will be formally given in the final G20 communiqué on Sunday, according to several sources close to the negotiations in Rome.
This agreement was concluded in early October under the auspices of the OECD by 136 countries, which represent more than 90% of global GDP. The reform should allow these countries to generate about 150 billion dollars of additional revenue per year through this minimum tax.
One of the components of the agreement is to reallocate a portion of the tax on the profits paid by multinationals to the countries where they carry out their activities. The tax will therefore no longer be due only where their headquarters are located.
The aim of the reform is to prevent multinationals and especially Gafa (an acronym for the giants Google, Amazon, Facebook and Apple), which have benefited greatly from the Covid-19 pandemic and the confinements, from paying derisory taxes in relation to their income.
The other part of the reform is the introduction of a minimum effective tax rate of 15% on the profits of multinationals. A state will be able to tax the foreign profits of one of its national companies that would have been taxed abroad at a lower rate than this minimum rate, in order to make up the difference.
The last-minute support of Ireland, Hungary and Estonia for the agreement in early October allowed the OECD to conclude negotiations just in time for the Rome summit.
Their support will have been crucial, as France wants to take advantage of its rotating presidency of the european council from January 2022 to have the minimum tax adopted by a european directive, which requires unanimity.