Finance Ministers of the G20 countries has endorsed a historic international tax reform agreement to fight profit shifting of multinational enterprises.
The two-pillar solution on the reallocation of profits of multinational enterprises and an effective global minimum tax has been discussed at recent international meetings and supported by the G7 economies and 132 out of 139 countries participating the Inclusive Framework (IFB) on BEPS. Further details, including a plan for its implementation, are now expected to be finalised in October 2021.
After the meeting in Venice on 9-10 July, the G20 Finance Ministers and Central Bank Governors issued a communiqué:
We endorse the key components of the two pillars on the reallocation of profits of multinational enterprises and an effective global minimum tax as set out in the “Statement on a two-pillar solution to address the tax challenges arising from the digitalisation of the economy” released by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) on July 1. We call on the OECD/G20 Inclusive Framework on BEPS to swiftly address the remaining issues and finalise the design elements within the agreed framework together with a detailed plan for the implementation of the two pillars by our next meeting in October. We invite all members of the OECD/G20Inclusive Framework on BEPS that have not yet joined the international agreement to do so. We welcome the consultation process with developing countries on assessing progress made through their participation at the OECD/G20Inclusive Framework on BEPS and look forward to the Organisation for Economic Co-operation and Development (OECD) report in October.
G20 high level symposium on tax policy and climate change
On the sideline of the meeting, Finance Ministers of the G20 countries also took part in a high-level tax symposium to discuss the role that tax policy could play in supporting and promoting transitions towards a greener and more sustainable economy.
They reaffirmed that reaching the common goal of net-zero emissions by 2050 is a priority, and that tax policy can help to achieve this objective in an effective and inclusive manner.
They recognised that countries may rely on a mix of policy instruments to reduce greenhouse gas emissions and may achieve their climate objectives with different speed and trajectories, taking into account national specificities, differing degrees of technological development, different availability of resources needed to finance the green transition. At the same time, Ministers acknowledged the importance of enhanced international cooperation to avoid potential spillovers stemming from unilateral approaches.
In two sessions, moderated by the IMF Deputy Managing Director and the OECD Secretary-General respectively, ministers presented their views, experiences and proposals on how to use fiscal tools to serve ambitious climate change mitigation strategies. They also discussed ways to limit the impact of climate policies on vulnerable households and tackle carbon leakage in order to avoid adverse effects on international trade and growth agendas.
The Italian Presidency has asked the IMF and the OECD to prepare a report on this subject ahead of the G20 Finance Ministers and Central Bank Governors’ meeting in October 2021. Building on the outcome of the symposium, the report will take stock of countries’ mitigation and adaptation policy strategies.
Daniele Franco, Italy’s Minister of Economy and Finance, stressed that a multilateral approach to tax policy and climate change is key to address successfully this truly global challenge. All participants agreed that this dialogue should be continued and conducted at both the political level – through consistent engagement of G20 Finance Ministers and Central Bank Governors – and at the technical level, possibly through a G20 study group.
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