G20 CFOs back landmark tax deal, pledge to fight inflation

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CFOs of major Group of 20 (G20) economies on Wednesday approved a 15% global minimum corporate tax rate and other new rules to tackle tax evasion by IT giants, while by promising to act if necessary in the face of rising inflation rates.

The single corporate tax reform plan crystallized during international negotiations within the Organization for Economic Co-operation and Development, with G20 members welcoming in their joint communiqué the establishment of a “more stable and fairer” global tax system.

“We have reached a final political agreement on all elements” of the issue, Italian Economy and Finance Minister Daniele Franco told a press conference. Italy holds the rotating presidency of the G20 this year.

Regarding the current state of the world economy, the finance ministers and central bank governors of the G20 affirmed that the recovery from the sharp slowdown induced by the coronavirus pandemic “has continued at a sustained pace”, underpinned by through the deployment of COVID-19 vaccines and political support.

But they noted that the recovery in economic activity has been widely divergent from country to country and remains exposed to downside risks, affecting the possible spread of new variants of COVID-19 and uneven timelines. for vaccination efforts.

“We will continue to support the recovery, avoiding any premature withdrawal of support measures,” G20 members said in the statement, while adding that central banks “are closely monitoring current price dynamics” and “will act according to the needs to fulfill their mandates, including price stability.

As demand accelerates thanks to easing restrictions on viruses but supply is slow to respond amid pandemic disruptions, the United States and some emerging market economies have seen rising inflation, according to the International Monetary Fund.

Although price pressures are expected to ease in most countries in 2022, the outlook for inflation is highly uncertain, the IMF warned in its latest World Economic Outlook report.

The G20 meeting was held in Washington on the sidelines of the annual fall gatherings of the IMF and the World Bank. The group’s deal will be announced at a G20 summit later this month in Rome.

Bank of Japan Governor Haruhiko Kuroda speaks at a press conference after the Group of 20 meeting of finance ministers and central bankers in Washington. | KYODO

Japan was represented by officials, including the Governor of the Bank of Japan, Haruhiko Kuroda. Finance Minister Shunichi Suzuki, who took office when Prime Minister Fumio Kishida’s office was launched on October 4, missed the event to attend a parliamentary session.

The rally came after 136 economies, in OECD-led talks, signed last Friday to introduce a 15% global minimum corporate tax rate in 2023 and a system forcing multinational companies to pay their taxes. “Fair share” of levies wherever they operate and generate profits.

The momentum to establish new universal tax rules for businesses operating across borders has intensified in recent years amid growing criticism that large U.S. tech companies such as Google LLC and Apple Inc. are making profits in low tax jurisdictions.

The comprehensive minimum tax agreement is expected to generate around $ 150 billion in new revenue per year, according to the OECD.

Governments that have joined the deal, including several low-tax jurisdictions that initially resisted, such as Ireland and Hungary, are expected to formulate a multilateral treaty next year, while preparing for the necessary revisions to the laws. national laws and regulations to put the new rules into practice. in 2023.

Kuroda told a press conference after Wednesday’s meeting that the tax deal was “historic.” US Treasury Secretary Janet Yellen has vowed to seek approval from the much-divided Congress to complete the international tax deal.

G20 finance chiefs also reaffirmed in their statement their commitment to ensuring “equitable and affordable” access to coronavirus vaccines, as uneven distribution continues to overshadow the prospects for recovery in low-income countries.

“We will work to help address COVID-19 bottlenecks and tool shortages in low- and middle-income countries over the coming months,” the document said.

After the G20 talks, the CFOs of the Group of Seven economies agreed on a common set of guiding principles for central bank digital currencies that called on issuing countries to ensure transparency and protection of the currency. private life.

The move by G7 members – Britain, Canada, France, Germany, Italy, Japan and the United States as well as the European Union – comes as China takes the lead in issuing central digital currency (CBDC) , with its pilot program. develop a digital yuan already underway.

“We reaffirm that any CBDC must be based on our long-standing public commitments to transparency, the rule of law and good economic governance,” G7 finance chiefs said in a statement released after their meeting.

Critics have expressed concern that China’s deployment of a CBDC could allow tighter state oversight of its economy and population, for example through the collection of big data on private financial transactions.

The G20 consists of the members of the G7 as well as Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, from South Africa, South Korea and Turkey.

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