During the first day of the Rome G20 summit, leaders of the world’s 20 biggest economies formally endorsed a revamping of international corporate tax rules, which is aimed at preventing corporations from seeking foreign tax havens. The agreement has been a major goal of the Biden administration and is considered an essential part of President Biden and Democrats’ plans to raise more revenue from taxes in the U.S.
The deal, backed by nearly 140 countries worldwide, would set a global minimum tax of 15 percent and require large multinational companies to pay taxes in the countries where they do business. According to the Hill, that would generate $60 billion or more in additional revenue annually in the U.S. alone. The new rule will be formalized when the leaders release a final G20 communiqué on Sunday, when the summit ends.
“The deal works because it removes the incentives for the offshoring of American jobs, it’s going to help small businesses compete on a level playing field, and it’s going to give us more resources to invest in our people at home,” a White House official said. “In our judgment, this is more than just a tax deal. It’s a reshaping of the rules of the global economy.”
“We reached a historic agreement for a fairer and more effective international tax system,” Italian prime minister Mario Draghi, the leader of this year’s G20, said at the summit. “These results are a powerful reminder of what we can achieve together.”
The global minimum tax had been agreed to by finance ministers of the world’s biggest economies earlier this year, but Saturday’s session represents the first time that country heads of state gave the green light. Negotiations over important aspects of the plan could take some time, especially since each individual nation must pass its own version of the tax, but Saturday’s endorsement suggests it’s on track.