The leaders of the world's 20 largest economies have agreed to implement an OECD deal for a global minimum 15 per cent corporation tax rate in 2023.
Ireland had been one of the holdouts against the agreement to reform how multinationals are taxed, but ultimately agreed to change its long-time flagship 12.5 per cent corporation tax rate earlier this month.
The political agreement "is a historic achievement through which we will establish a more stable and fairer international tax system", the leaders of the G20 declared following a summit in Rome.
They called on the OECD to develop detailed rules “to ensure that the new rules will come into effect at global level in 2023”.
The European Commission announced ahead of the conference that it would publish draft legislation on how to transpose the agreement into law by the end of 2021.
‘Historic agreement’
Every leader at the summit, representing some 80 per cent of the world's economy, had spoken in support of the reform, United States treasury secretary Janet Yellen said.
“Every G20 head of state endorsed an historic agreement on new international tax rules, including a global minimum tax that will end the damaging race to the bottom on corporate taxation,” Yellen said during the summit.
"It's a critical moment for the US and the global economy." She offered congratulations to US president Joe Biden for the "achievement".
However, the Democrat must still push the deal through the US Congress, where he may encounter resistance to the plans. Mr Biden said the reform had received “clear” support from the 20 nations, representing “allies and competitors alike”.
“This is more than just a tax deal, it’s diplomacy reshaping our global economy and delivering for our people,” he said.
Fairer taxation
The reform is aimed to bring about a fairer taxation of the digital giants that have minimised their tax liabilities by using the most advantageous jurisdictions, drawing the ire of some of the world’s largest economies who feel their national exchequers are missing out despite vast revenues being made through sales to their citizens.
Proposed tweaks to the jurisdictions to which tax is due are expected to reduce Irish revenues by as much as €2 billion a year according to Government figures.
Opening the summit, Italian prime minister Mario Draghi lauded efforts to "reduce inequalities" and "promote sustainability" and said the success of Covid-19 vaccines and efforts to stimulate economic recovery showed there was reason for optimism.
“Together we are building a new economic model and the world will be all the better for it,” the former central banker said, describing the tax deal as “a historic agreement for a fairer and more effective international tax system”.
With the Chinese and Russian leaders participating remotely, the 20 countries are negotiating how to speed up a fairer global distribution of vaccines and preparing pledges to curb climate change in a bid to build momentum ahead of the United Nations Cop26 climate conference in Glasgow.
