MILAN: G20 finance ministers meeting in Venice on Friday and Saturday could rally the world’s top economies behind a global plan to tax multinationals more fairly, already hashed out among 130 countries representing 90 percent of world output.
On the face of it, the Group of 20 — the world’s 19 biggest economies plus the European Union — have already backed the framework for global tax reform, agreed on July 1 among members of the Organisation for Economic Cooperation and Development (OECD) alongside China and India.
But negotiations continue behind the scenes to convince low-tax EU countries such as Hungary, Ireland and Estonia, who declined to sign up to the OECD deal to tax global companies at a rate of at least 15 percent.
Italian Finance Minister Daniele Franco, whose country holds the G20 presidency, said he is “confident” of reaching a “political agreement” among finance ministers in Venice that would “radically change the current international tax architecture”.
– Taxing digital giants –
The hold-out European countries have relied on low tax rates to attract multinationals and build their economies.
Ireland, the EU home to tech giants Facebook, Google and Apple, has a corporate tax rate of just 12.5 percent, while Hungary has one of 9.0 percent and Estonia almost only taxes dividend payments.
However, the support of these three countries is crucial for the EU, as the adoption of a minimum tax rate would require unanimous backing from member states.
The minimum rate is one of two pillars of global tax reform.
The other is less controversial — a plan to tax companies where they make their profits rather than simply where they are headquartered.
It has in its sights digital giants such as Google, Amazon, Facebook and Apple, which have profited enormously during the pandemic but pay tax rates that are derisory when compared to their income.
When the new tax regime is in place — the OECD is aiming for 2023 — then national digital taxes imposed by countries such as France, Italy and Spain will disappear.