The G20 finance ministers will meet today and tomorrow in Venice, Italy. On the agenda? The global minimum corporate tax rate.
Establishing a global minimum corporate tax rate – which would mean that no matter where companies are based, they would pay at least a certain amount in corporate taxes – is a priority for US president Joe Biden’s administration. US treasury secretary Janet Yellen has argued that putting one in place will end the “race to the bottom” between countries. And the policy could be genuinely revolutionary, challenging the status of international corporations as the true winners of globalisation.
In early June, the G7 finance ministers met and came to an agreement on a general corporate tax rate of at least 15 percent. At the time, the finance ministers’ agreement on taking such a step was hailed (including by me) as a major step. It seemed to be proof that summits like the G7 can still have meaning beyond a photo opportunity – that they can be events at which world leaders work not for each other and the world’s richest and most powerful, but for the people.
But a step is not the whole journey. First, there have been hiccups since the G7 agreement: the UK, for example, has been looking into getting an exemption for London’s financial sector, which would help render the minimum tax rate toothless. Second, European countries like Ireland and Hungary, which were not at the G7 but without which the EU can’t come to any real agreement, attract companies to their shores in part by having low corporate tax rates. There is worry among experts in other countries, like Switzerland, about what negative consequences such a tax rate would have for them economically even before it comes into effect. Third, the G7’s share of global GDP has declined. If the G7 is the only group that agrees to the global corporate minimum tax rate, it will be something, but not enough.
The G20, on the other hand, also includes countries like Brazil, China, India, and Russia (the latter was also included in the G7, which was the G8, until it annexed Crimea in 2014). If Yellen and her allies succeed in establishing a minimum corporate tax rate over the weekend, they will show not only that such summits still have value, but that the United States still has some sway in establishing global protocol. This time, the beneficiaries would not only be American companies, but citizens around the world.