On Sunday 31 October, the world’s twenty largest economies endorsed the agreement on international corporate tax reform which had been agreed upon by 136 countries in the OECD in early October (see EUROPE 12808/2).
This “historic achievement” will establish a “more stable and fairer” international tax system, the G20 said in its final declaration. It calls on the OECD to “swiftly” develop the model rules and multilateral instruments with a view to ensure that the new rules will come into effect at global level “in 2023”.
“Agreement without implementation is de facto no agreement at all. So countries must move as quickly as possible to bring both pillars into effect”, said OECD Secretary-General Mathias Cormann.
The European Commission will present, before the end of the year, a proposal for a directive to incorporate, into EU law, Pillar II of the agreement on a global minimum tax rate of 15%. The aim is to approve this text under the French Presidency of the EU Council in the first half of 2022.
In the US, Congress has yet to endorse the OECD agreement.
According to an analysis by the European Tax Observatory, developed countries will get the lion’s share of this tax reform. Within the EU, Belgium is expected to be the big winner from the implementation of Pillar II of the 15% global minimum tax rate agreement with the raising of an estimated €20.1 billion in additional tax revenue (see EUROPE 12823/8).
The international tax agreement means that the proposed EU tax on digital services will be abandoned. France, Italy, Spain and Austria, on the one hand, as well as the UK, which already apply a national digital tax, will be able to maintain it until the OECD agreement comes into force, as transitional arrangements have recently been agreed upon (see EUROPE 12818/11).
A solid but uneven global recovery
On the economic front, the G20 countries welcomed the strong recovery enabled by the Covid-19 vaccination campaigns, but it remains “highly divergent across and within countries”. And the recovery is exposed to downside risks, such as the possible spread of new variants of the Covid-19 virus and/or uneven vaccination paces around the world. Hence the commitments to provide vaccines to the most vulnerable countries (see other news).
The G20 countries reiterate their commitment to use all available fiscal and financial tools “for as long as required” to address the economic and social consequences of the pandemic. A premature lifting of these support measures should be avoided while preserving the long-term sustainability of public finances, they added.
See the G20 Summit Declaration: https://bit.ly/2Y7D9uu (Original version in French by Mathieu Bion)