Daily Times

G20 finance ministers have announced they are supporting a historic shake-up in tax laws that target multinational corporations that move profits into low-tax havens.

The support of the 19 biggest economies and the European Union (EU) will help ensure the tax revolution becomes a reality following eight years of intense negotiations.

“We have achieved a historic agreement on a more stable and fairer international tax architecture,” the G20 finance ministers said in a final statement after the meeting in Italy. “We endorse the key components of the two pillars on the reallocation of profits of multinational enterprises and an effective global minimum tax.” The deal will change international rules so that large multinationals pay their share of tax in the countries in which they do business. It will introduce a global minimum rate that ensures multinationals pay tax of at least 15 percent on profit in each country in which they operate.

A total of 131 countries representing 95 percent of the world’s gross domestic product have signed up to a deal on global tax reform, building on the agreement reached when the UK hosted G7 ministers in London last month.

“The world is ready to end the global race to the bottom on corporate taxation,” US Treasury Secretary Janet Yellen said. She added that the world “should now move quickly to finalise the deal”.

While tax campaigners point to loopholes in the proposals and wanted a more ambitious crackdown, the move is a rare case of cross-border coordination in tax matters and could strip many tax havens of their appeal. If all goes to plan, the new tax rules should be translated into binding legislation worldwide before the end of 2023.