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G20 economies back deal for global tax reform

G20 economies reach agreement on deal for global tax reform
G20 countries have backed a landmark move for a global tax reform, which would set a minimum tax rate.


G20 economies back deal for global tax reform

In a rare cross-border coordination, G20 countries have backed a landmark move for a global tax reform, which would set a minimum tax rate for major companies – especially the big tech. This is an effort to stop multinationals from shifting profits into low-tax havens and win back billions of dollars in lost revenues.

The pact to establish a minimum global corporate tax rate of at least 15% is an attempt to squeeze more money out of big tech like Google and Amazon. With talks ongoing, a final agreement on the minimum tax rate is not expected until the G20 leaders’ summit in October.

An official communiqué said the support measures being put in place by wealthier countries to shield their economies from the ravages of the COVID-19 pandemic must be in line with central bank commitments to keep inflation stable. “We will continue to sustain the recovery, avoiding any premature withdrawal of support measures, while remaining consistent with central bank mandates, including on oil stability.”

German Finance Minister Olaf Scholz said all the countries are coming together to support this international process in finding a way to a minimum taxation. He said that with the G20 members on board, the focus will turn to how to put the measures into action so they can take effect by the current 2023 deadline.

US Treasury Secretary Janet Yellen said while Washington will seek to address the concerns from some reluctant countries, it’s not essential that every country be on board. “This agreement contains a kind of enforcement mechanism that can be used to make sure that countries that are holdouts are not able to undermine, to use tax havens that undermine the operation of this global agreement.

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Geoffrey Okamoto, First Deputy Managing Director of the International Monetary Fund, as per Reuters, called it a net win for the world. He said work was still needed to simplify the agreement for countries, especially poorer ones, to take it on board. “It has to be simple enough for the vast majority of the world to actually implement and administer it.”

The G20 members account for more than 80% of the world gross domestic product, 75% of global trade and 60% of the population of the planet, including the US, Japan, India, France and Germany.

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