G20 finance chiefs in Venice back tax deal

US Secretary of the Treasury Janet Yellen arrives to attend the G20 finance ministers and central bank governors’ meeting in Venice yesterday. Speaking at a climate tax forum there before the meeting, Yellen called for better international co-ordination to avoid trade frictions.

Finance ministers representing the G20 large economies back a deal setting a global floor for corporate tax rates and will push to resolve outstanding issues on it by October, the latest draft of a joint communique said. The communique, a copy of which was seen by Reuters, urged any hold-out nations to join the deal. Two sources said the statement was expected to be released without changes at their meeting in the Italian city of Venice due to be wrapped up today. “We call on (countries involved in the global talks) 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,” the statement said. “We invite all members (involved in the discussion) that have not yet joined the international agreement to do so.” The statement, if approved, represents political endorsement of an agreement this month among 131 countries, at talks hosted by the Paris-based Organisation for Economic Co-operation and Development, on taxation of multinationals’ profits and setting a global minimum corporate tax rate of at least 15%. The aim is to have G20 leaders give it final blessing at an October summit in Rome. If all goes to plan, the new tax rules should be translated into binding legislation worldwide before the end of 2023. However a fight in the US Congress over President Joe Biden’s proposed tax increases on corporations and wealthy Americans could yet create hurdles. Equally, there could be difficulties because European Union member states Ireland, Estonia and Hungary are among the countries that have not yet signed up to the deal. “I am convinced that in the end we will come to a joint decision in the EU,” German Finance Minister Olaf Scholz told radio station DLF before heading to the talks. The meeting of G20 finance ministers and central bankers in Venice is their first face-to-face encounter since the start of the Covid-19 pandemic. The G20 members account for more than 80% of world gross domestic product, 75% of global trade and 60% of the population of the planet, including big-hitters the United States, Japan, Britain, France, Germany and India. In an addition to earlier drafts, the communique said the support measures being put in place by wealthier countries to shield their economies from the ravages of the pandemic must be in line with central bank commitments to keep inflation stable. “We will continue to sustain the recovery, avoiding any premature withdrawal of support measures, while remaining consistent with central bank mandates — including on price stability,” it read. Concerns have been rising recently that ultra-loose monetary policy in many countries following the pandemic could unleash a surge in inflation, possibly testing major central banks’ commitment to maintain stable prices. The statement also urged faster distribution of Covid-19 vaccines, drugs and tests across the world, but made no new commitments to that end, and called on the International Monetary Fund to come up with ways for countries to steer IMF resources towards needier nations. The IMF said yesterday its executive board has backed a $650bn allocation of IMF Special Drawing Rights, advancing the distribution of currency reserves to the IMF’s 190 member countries towards a targeted completion by the end of August. Climate change policy will also feature at the Venice talks. Speaking at a climate tax forum there before the G20 meeting, US Treasury Secretary Janet Yellen called for better international co-ordination to avoid trade frictions. She was speaking days before the EU unveils next week a so-called carbon border adjustment mechanism (CBAM) imposing levies on the carbon content of imported goods. The scheme is an attempt to discourage “carbon leakage”, the transfer of production to countries with less onerous emission restrictions, but some trading partners fear it could act as a protectionist tool. “Recognising the different paths countries are taking to address climate change could help avoid policy measures to address carbon leakage that inadvertently create new international risks and spillovers,” Yellen said.