World closer to corporate tax overhaul

Twenty of the world's biggest economies agreed on Saturday to close loopholes that allow massive corporations to avoid paying tax by flowing profits through so-called tax havens.

The G20's decision mirrors one made weeks earlier by the G7 grouping of advanced economies and calls for the imposition of a minimum tax rate for multinational corporations, no matter where the companies claim to have a head office.

The idea was also recently endorsed by 130 nations and territories at talks held in Paris by the Organization for Economic Cooperation and Development, or OECD.

Janet Yellen, the United States' Treasury secretary, said: "The world is ready to end the global race to the bottom on corporate taxation, and there's broad consensus about how to do it."

The Financial Times newspaper said the G20, G7, and OECD will now pile pressure on the handful of the so-called "holdout countries" that do not agree with the concept of multinationals being compelled to pay a fair amount of tax.

The G20 members and their central banks issued a communique after their meeting in Venice on Saturday that said the details of their "historic agreement" for "a more stable and fairer international tax architecture" should be finalized in Rome in October, at the organization's next full gathering.

The Financial Times said Yellen noted that holdout nations do not have to support the deal for it to work.

"It's not essential that every country be on board," she said.

Bruno Le Maire, France's finance minister, added that the bare bones of the deal represents "a once-in-a-century tax revolution".

The G20 hopes to set the global corporate tax rate at the meeting in October, and figure out how tax collected from multinationals should be distributed.

The G7 had previously suggested that a global corporate tax rate of 15 percent would be adequate but the Reuters news agency said France has started pushing for a 25 percent rate.

Reuters said the call for a global corporate tax rate arose after digital commerce made it possible for major technology companies to register their profits in countries and territories that have low rates of taxation, regardless of where that income was collected.

Nations including Barbados, Estonia, Hungary, Ireland, Kenya, Nigeria, and Sri Lanka have opposed the reform. Many of them have benefitted from allowing multinationals to pay tax in their jurisdictions.

However, other low-tax jurisdictions, including the Bahamas and Switzerland, have signed up for the reforms, the Financial Times noted.

The new tax will likely be aimed at multinationals with a global turnover of more than 20 billion euros ($23.8 billion), the BBC said.

The Guardian newspaper added that the deal is the culmination of "eight years of wrangling over the issue".