(Corrects the spelling of the World Health Organization in the 19th paragraph)
VENICE, Italy (Reuters) – Chief financial officers of the major G20 economies, in talks on Saturday, approved a groundbreaking move to prevent multinational corporations from shifting profits to low-tax havens, where they will also warn that coronavirus variants will fuel the global economic recovery threaten.
They also recognized the need to ensure fair access to vaccines in poorer countries. A draft for a communique to be approved at the meeting in Venice, Italy, did not contain any concrete new proposals.
The tax deal should be the largest new political initiative to emerge from their talks. It spans eight years of tussle over the tax issue and the aim is for national leaders to finally bless it at the G20 summit in Rome in October.
The pact would set a minimum global corporate tax of at least 15% to discourage multinational corporations from looking for the lowest tax rate. It would also change the way highly profitable multinational corporations like Amazon and Google are taxed, in part on where they sell products and services, rather than where they are headquartered.
Treasury Secretary Olaf Scholz confirmed to reporters that all G20 economies were on board, while Treasury Secretary Janet Yellen said a handful of smaller countries that are still opposed, such as low-tax Ireland and Hungary, would be encouraged to sign up October on.
“We will try, but I should stress that it is not absolutely necessary that every country is on board,” she said.
“This agreement contains some kind of enforcement mechanism that can be used to ensure that countries that are in lockdown are unable to take advantage of tax havens that undermine the functioning of this global agreement.”
The G20 members account for more than 80% of the world’s gross domestic product, 75% of world trade and 60% of the world’s population, including the big hits USA, Japan, Great Britain, France, Germany and India.
In addition to the EU holdouts Ireland, Estonia and Hungary, Kenya, Nigeria, Sri Lanka, Barbados and St. Vincent and the Grenadines have not yet joined.
Among other sticking points, a dispute in the US Congress over the tax increases planned by President Joe Biden for corporations and wealthy Americans could cause problems, as well as a separate EU plan for a digital levy on technology companies.
US Treasury officials say the EU plan is inconsistent with the broader global deal, even if the levy is primarily aimed at European companies.
Beyond the tax deal, the G20 will address concerns that the rise in the rapidly spreading delta coronavirus, combined with unequal access to vaccines, poses risks to global economic recovery.
Citing the improvements in the global outlook so far, the draft adds: “However, the recovery is marked by large divergences between and within countries and remains exposed to downside risks, in particular the spread of new variants of the COVID-19 virus and different speeds of vaccination. “
A Reuters tally of new COVID-19 infections shows that they are increasing in 69 countries, with the daily rate pointing up since the end of June and now reaching 478,000. Here
“We all need to improve our vaccination performance all over the world,” French Finance Minister Bruno Le Marie told reporters. “We have very good economic forecasts for the G20 economies and the only hurdle on the way to a quick, solid economic recovery is the risk of a new wave.”
IMF executive director Kristalina Georgieva said the world is facing “a worsening two-pronged recovery”, partly due to differences in vaccine availability.
“It is a critical moment that requires urgent action from the G20 and policy makers around the world,” she said in an appeal leading up to the meeting.
While the communique emphasized support for a “fair global exchange” of vaccines, it did not propose any specific new measures, but merely confirmed a recommendation of US $ 50 billion in new vaccine funding from the IMF, World Bank, World Health Organization and World Trade Organization .
The IMF is also urging the G20 countries to adopt a clear path that allows rich countries to donate newly issued IMF reserves valued at around $ 100 billion to poorer countries.
The IMF’s first assistant executive director Geoffrey Okamoto told Reuters that his goal is to come up with a viable option for redirecting newly issued Special Drawing Rights to countries in need when a new allocation of $ 650 billion is completed in late August .
Additional reporting by Gavin Jones, Christian Kraemer, Francesco Guarascio; Letter from Mark John; Editing by Gareth Jones