Global tax reform gains steam as G20 FMs back new levies – News Vibe24

    Global tax reform gains steam as G20 FMs back new levies - Times of India
    NEW DELHI: Top financial officials representing most of the global economy have backed an extensive international tax review that includes a 15% global minimum corporate levy to prevent tech giants from big companies from resorting to low tax havens.
    Finance ministers from the Group of 20 approved the plan at a meeting in Venice on Saturday. Italy hosted the meeting because it holds the rotating presidency of the G-20, which accounts for more than 80% of the world economy.
    US Treasury Secretary Janet Yellen said the proposal would end a “self-destructive international tax competition” in which countries have been cutting rates for years to attract companies. He said it was “a race no one has won. “What it has done is deprive us of the resources we need to invest in our people, our workforce and our infrastructure.”
    The next steps include more work on key details in the Paris-based Organization for Economic Co-operation and Development and then a final decision at the G20 Presidents and Prime Ministers’ meeting on 30-31 October in Rome. If enacted, the plan could reshape the global economy, but resistance is growing from businesses, which could soon face higher tax bills, as well as from small but central, low-tax countries such as Ireland, which would see their financial models up and down.
    Implementation, which is expected as early as 2023, will also depend on action at national level. Countries will apply the minimum tax requirement to their own laws. Other parties could require a formal treaty. The draft proposal was approved on July 1st in talks between more than 130 countries convened by the OECD.
    The international tax proposal aims to prevent the world’s largest companies from using accounting and legal systems to shift their profits to countries where there is little or no tax – and where the company can run a small or no real business. Below the minimum, companies that evade taxes abroad will pay them at home. This will eliminate the incentives to use or create tax havens. From 2000-2018, US companies accounted for half of all foreign profits in seven low-tax jurisdictions: Bermuda, Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland.
    A second part of the tax plan is to allow countries to tax a portion of the profits of companies that make profits without a physical presence, such as through online retail or digital advertising. This segment emerged after France, followed by other countries, imposed a digital services tax on US tech giants such as Amazon and Google. The US government views these national taxes as unfair trade practices and faces retaliation against these countries’ imports into the US through higher import taxes. According to the tax agreement, these countries should withdraw or abstain from national taxes in favor of a unified global approach, theoretically considering trade differences with the US. American technology companies would then face only one tax regime, instead of a multitude of different national digital taxes.

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