G20 approves tax crackdown, warns of virus variants

(Corrects the spelling of the World Health Organization in the 19th paragraph)

By David Lawder and Leigh Thomas

VENICE, Italy (Reuters) – Financial chiefs of major G20 economies have approved a landmark move to prevent multinationals from shifting profits to low-tax tax havens in talks on Saturday where they will also warn that Coronavirus variants threaten the global economic recovery.

They also recognized the need to ensure equitable access to vaccines in the poorest countries. But a draft communiqué to be approved at the meeting in the Italian city of Venice did not contain new specific proposals on how to proceed.

The tax deal was to be the biggest new policy initiative to emerge from their discussions. He is crowning eight years of wrangling over the tax issue and the goal is for national leaders to give him one last blessing at a G20 summit in October in Rome.

The pact would establish a global minimum corporate tax of at least 15% to deter multinationals from seeking the lowest tax rate. It would also change the way highly profitable multinationals such as Amazon and Google are taxed, based in part on where they sell products and services, rather than the location of their headquarters.

German Finance Minister Olaf Scholz confirmed to reporters that all G20 economies are in favor of the pact, while US Treasury Secretary Janet Yellen said a handful of small countries still opposed, such as the Low tax Ireland and Hungary would be encouraged to sign up. until October.

“We will try to do this, but I must stress that it is not essential that every country is on board,” she said.

“This agreement contains a kind of enforcement mechanism that can be used to ensure that recalcitrant countries are not in a position to undermine – to use tax havens that undermine the functioning of this global agreement.”

G20 members represent over 80% of the world’s gross domestic product, 75% of world trade, and 60% of the planet’s population, including the United States, Japan, Britain, France, Germany and India.

In addition to Ireland, Estonia and Hungary, recalcitrant countries of the European Union, the other countries which have not signed are Kenya, Nigeria, Sri Lanka, Barbados and Saint Vincent and the Grenadines.

Among other sticking points, a fight in the US Congress over President Joe Biden’s planned tax increases on businesses and wealthy Americans could cause problems, as could a separate European plan for a digital tax on businesses. technological.

U.S. Treasury officials say the EU plan is inconsistent with the broader global deal, even though the tax largely targets European businesses.

TWO TRACK RECOVERY

Beyond the tax deal, the G20 will address concerns that the rise of the rapidly spreading variant of the Delta coronavirus, combined with uneven access to vaccines, poses risks to the global economic recovery.

Citing improvements in the global outlook so far, the project adds: “However, the recovery is characterized by large divergences between and within countries and remains exposed to downside risks, especially the spread of new variants. COVID-19 virus and different rhythms. vaccination. “

A Reuters tally of new COVID-19 infections shows they are increasing in 69 countries, with the daily rate pointing up since late June and now reaching 478,000. Https://graphics.reuters.com/world-coronavirus- tracker-and-maps

“We all need to improve our vaccine 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 obstacle on the way to a quick and strong economic rebound is the risk of having a new wave.”

IMF Managing Director Kristalina Georgieva said the world was facing “a worsening two-track recovery” in part due to differences in vaccine availability.

“This is a critical moment that calls for urgent action by the G20 and policy makers around the world,” she said in a call ahead of the meeting.

The statement, while highlighting support for “equitable global sharing” of vaccines, did not propose new concrete measures, simply acknowledging a recommendation of $ 50 billion in funding for new vaccines by the IMF, the World Bank, the World Health Organization and World Trade Organization.

The IMF is also pushing the G20 countries to decide on a clear path for rich countries to contribute some $ 100 billion in newly issued IMF reserves to the poorest countries.

IMF’s first deputy managing director Geoffrey Okamoto told Reuters his goal was to be able to present a viable option for channeling the newly issued Special Drawing Rights to countries in need until a new allocation. of $ 650 billion is completed by the end of August.

(Additional reporting by Gavin Jones, Christian Kraemer, Francesco Guarascio; written by Mark John, edited by Gareth Jones)


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