G-20 CFOs back landmark tax deal, vow to act against inflation

The chief financial officers of the Group of 20 major economies on Wednesday approved a 15% global minimum corporate tax rate and other new rules to fight tax evasion by IT giants, while promising to ” act as necessary in the face of rising inflation rates amidst supply disruptions due to the coronavirus. pandemic.

What should become a once-in-a-century corporate tax reform plan has crystallized through international negotiations at the Organization for Economic Co-operation and Development, with G-20 members welcoming in statement joint establishment of “a more stable and more fair global tax system.”

Regarding the current state of the world economy, finance ministers and central bank governors of the G-20 affirmed that the recovery from the severe recession induced by the pandemic “has continued at a sustained pace”, argued through the deployment of COVID-19 vaccines and political support.

File photo shows Group of 20 chief financial officers meeting in Italy in July 2021. (Photo courtesy of UK Treasury) (Kyodo)

But they noted that the recovery in economic activity has been widely divergent from country to country and remains exposed to downside risks, regarding the possible spread of new coronavirus variants and uneven timelines for efforts. vaccination.

“We will continue to support the recovery, avoiding any premature withdrawal of support measures,” G-20 members said in the statement, while adding that central banks “are closely monitoring current price dynamics” and ” act as necessary to meet their mandates, including price stability.

With demand accelerating thanks to the easing of restrictions on viruses, but supply being slow to respond, the United States and some emerging market economies have seen higher inflation. Although price pressures are expected to ease in most countries in 2022, the outlook for inflation is highly uncertain, the International Monetary Fund warned in its latest World Economic Outlook report.

The G-20 meeting was held in Washington on the sidelines of the annual fall meetings of the IMF and the World Bank. The group’s agreement will be signaled at a G-20 summit meeting later this month in Rome.

Japan was represented by officials, including the Governor of the Bank of Japan, Haruhiko Kuroda. Finance Minister Shunichi Suzuki, who took office when Prime Minister Fumio Kishida’s office was launched on October 4, missed the event to attend a parliamentary session.

The rally came after 136 economies, in OECD-led talks, signed last Friday to introduce a 15% global minimum corporate tax rate in 2023 and a system forcing multinational companies to pay their “fair share” of levies wherever they operate and generate profits.

The momentum to establish new universal tax rules for businesses operating across borders has intensified in recent years amid growing criticism that large U.S. tech companies such as Google LLC and Apple Inc. are making profits in low tax jurisdictions.

The comprehensive minimum tax agreement is expected to generate around $ 150 billion in new revenue per year, according to the OECD.

Governments that have joined the deal, including several low-tax jurisdictions that initially resisted, such as Ireland and Hungary, are expected to formulate a multilateral treaty next year, while preparing for the necessary revisions to the laws. national laws and regulations to put the new rules into practice. in 2023.

Kuroda told a press conference after Wednesday’s meeting that the tax deal was “historic.” U.S. Treasury Secretary Janet Yellen has pledged to work to gain approval from the tightly divided Congress to bring about the international tax deal.

G-20 finance chiefs also reaffirmed in their statement their commitment to ensuring “equitable and affordable” access to coronavirus vaccines, as uneven distribution continues to overshadow the prospects for recovery in low-income countries.

“We will work to help address COVID-19 bottlenecks and tool shortages in low- and middle-income countries over the coming months,” the document said.

After the G-20 talks, the CFOs of the Group of Seven economies met to discuss a common set of guiding principles for central bank digital currencies that would likely call on issuing countries to ensure transparency and accountability. Protection of private life.

The move by the G-7 countries – Britain, Canada, France, Germany, Italy, Japan and the United States as well as the European Union – comes as China takes the initiative to issue a CBDC, with its pilot program to develop a digital yuan already underway.

The G-20 includes the G-7 countries as well as Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa. South, South Korea and Turkey.

Associated coverage:

G-20 leaders affirm cooperation on humanitarian crisis in Afghanistan

FOCUS: G-20 welcomes cooperation, but easing US-China tensions not in sight

G-20 backs “historic” deal to tackle tax evasion by multinationals

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