G20 endorses global minimum tax plan as linchpin to tackle multinationals

UK Prime Minister Boris Johnson, centre, and US President Joe Biden, right, during the plenary session of the G20 summit in Rome. EPA

Leaders of the world’s biggest economies have endorsed a global minimum tax on corporations, which will be the linchpin of new international tax rules.

They are aimed at blunting the fiscal advantages that some multinational giants enjoy with strategic regional headquarters in low-tax countries.

The deal did fall short of US President Joe Biden’s original call for a 21 per cent minimum tax but he was still pleased with the result.

“Here at the G20, leaders representing 80 per cent of the world’s GDP – allies and competitors alike – made clear their support for a strong global minimum tax,” the president said on Twitter.

“This is more than just a tax deal – it’s diplomacy reshaping our global economy and delivering for our people.”

G20 finance ministers in July had already agreed on the 15 per cent minimum tax but it still needed formal endorsement at the summit on Saturday in Rome.

“There are good things to report here. The world community has agreed on a minimum taxation of companies. That is a clear signal of justice in times of digitalisation,” departing German Chancellor Angela Merkel said.

“From the pandemic, to climate change, to fair and equitable taxation, going it alone is simply not an option,” Italian Prime Minister Mario Draghi said.

Summit's host Italy had put health and the economy top of the agenda for Saturday, setting aside Sunday for climate change.

The corporate tax deal was hailed as evidence of renewed multilateral co-ordination.

Major corporations face a minimum 15 per cent tax wherever they operate from 2023 to prevent them from shielding their profits in offshore entities.

G20 leaders also broadly backed calls to extend debt relief for impoverished countries and pledged to vaccinate 70 per cent of the world's population against Covid-19 by mid-2022.

Many of the other G20 leaders will fly from Rome to Glasgow for the Cop26 climate summit. Others, including the leaders of Russia, China and Brazil will not attend the Scottish summit in person.

British Prime Minister Boris Johnson acknowledged the G20 and Cop26 talks would be difficult, but warned that without courageous action, world civilisation could collapse as swiftly as the ancient Roman empire, ushering in a new Dark Age.

“It's going to be very, very tough to get the agreement we need,” he said as he stood next to the ruins of the Colosseum amphitheatre – a symbol of once mighty Rome.