G20 leaders have formally endorsed a 15 percent global corporate minimum tax

KATHMANDU: President Joe Biden and other world leaders at the G20 summit on Saturday have formally endorsed a global corporate minimum tax, a significant agreement that was reached after months of negotiations.

The new global minimum tax of 15 percent would seek to roll back the decadeslong decline in corporate tax rates, which has hindered governments across the globe from appropriating funds for various spending programs.

“We reached a historic agreement for a fairer and more effective international tax system,” Italian Prime Minister Mario Draghi said at the opening of the summit in Rome.

The deal would represent a major victory for Biden and Treasury Secretary Janet Yellen, who have championed an international floor on corporate taxes and pushed for a deal to come together among the countries.

The agreement had previously been backed by the finance ministers of each G20 country, but with the respective heads of state now on board with the plan, the next step is for the framework to be crafted into viable legislation.

An endorsement of the minimum tax is set to be included in the joint communiqué, the statement that G20 leaders release at the conclusion of the summit laying out the their priorities. After the summit, the counties will then need to individually ratify the new tax.

To adhere to the requirements, Congress will be tasked with approving legislation increasing the tax that US companies pay on international profits to 15 percent. Biden administration officials project that the new tax will generate $60 billion or more annually in the country.

“The deal works because it removes the incentives for the offshoring of American jobs, it’s going to help small businesses compete on a level playing field, and it’s going to give us more resources to invest in our people at home,” a senior administration official told reporters on a call.

“It’s a game changer for American workers, taxpayers, and businesses. And in our judgment, this is more than just a tax deal; it’s a reshaping of the rules of the global economy,” the official added.

Draghi, noting the continued affect that the COVID-19 pandemic is having throughout the world, emphasized that the G20 must continue to work together on tough issues.

“From the pandemic to climate change to fair and equitable taxation, going it alone is simply not an option,” he said. “We must do all we can to overcome our differences. And we must rekindle the spirit that led to the creation of this group.”

In addition to the US, the Group of 20 boasts memberships of countries that comprise of about 80 percent of the world’s gross domestic product, including Argentina, Britain, China, France, Germany, India, Italy, Japan, Russia, and South Africa, among others.