Original title: G20 finance ministers and central bank governors reached a historic agreement on tax reform
On July 10, local time, the third meeting of finance ministers and central bank governors of the Group of Twenty (G20) closed in Venice, Italy. Xinhua News Agency.
The global tax reform that has been brewing for many years is on the line.
On July 10, local time, the third meeting of the finance ministers and central bank governors of the Group of Twenty (G20) closed in Venice, Italy, and issued a communiqué stating that a historic agreement was reached on a “more stable and fairer international taxation framework”. “.
Previously, under the coordination of the OECD, a two-pillar plan for the reform of the international taxation framework was formally formed, and it has been supported by 132 countries and jurisdictions (Switzerland and Peru are currently newly joined).
The OECD predicts that through the two-pillar international tax reform framework, taxation rights for profits exceeding US$100 billion each year will be transferred to market jurisdictions; at the same time, if the global minimum corporate tax rate is set at no less than 15%, the world will add new contracts every year. $150 billion in taxes.
The communiqué of the G2O finance ministers and central bank governors meeting called on more countries to join the consultations in the future.
At the same time, all parties also stated in the communiqué that they are determined to control the epidemic in each country and recognize the role of new crown immunization as a “global public product.” The G20 finance ministers and central bank governors urge the public and private sectors to resolve the current gap and equitably share safe, effective and affordable vaccines on a global scale, especially with developing countries.
In the tax reform, the United States and Europe have their own problems
In the OECD’s plan, the first pillar of the international tax reform framework is to redistribute part of the taxation rights of large multinational companies from the place of business registration to the place of business operation and profit; the second pillar is to establish the world’s lowest corporate tax rate and end the taxation of various countries. Bottom competition.
It is expected that this global minimum corporate tax rate will be set at no less than 15%.
This time, the G20 Finance Ministers and Central Bank Governors’ meeting communique pointed out that it is hoped that all parties will come up with specific plans to complete the design of the international tax reform framework at the next October meeting, and invite all OECD/G20 members who have not yet joined The members of this international agreement joined.
It is reported that 9 countries that still have doubts about this include Ireland, Hungary, Estonia, Sri Lanka and Nigeria.
After the meeting, US Treasury Secretary Yellen said that the G20 will work hard to urge countries including Ireland and Hungary to accept the agreement, but she also added that the advancement does not require their consent.
Gu Baozhi, director of the Institute of World Economics, Ministry of Commerce, explained to a reporter from China Business News that the OECD-led international taxation negotiations are the same as those of the World Trade Organization (WTO). Based on the principle of unanimous agreement, countries that have not joined the OECD framework will have no choice. To exert influence on negotiations, it is very likely that they can only passively accept the negotiated results.
Yellen said this time that not every country has participated, but she praised the progress of the G20, saying that “the world is ready to end global corporate tax competition, and there is a broad consensus on how to do this.” .
French Finance Minister Le Maire called this tax agreement “a tax revolution once in a century.”
“International tax reform has been agreed and there is no turning back.” Le Maire said.
However, in the face of the global tax reform process, both the European Union and the United States are facing some internal problems. At present, the European Union needs to persuade Ireland and other opposing member states, and the United States itself, which promotes the global tax reform plan, has to pass the US Congress. Brady, a Republican member of the Ways and Means Committee of the US House of Representatives, described the global tax reform plan as “a dangerous economic surrender that transfers American jobs overseas.”
It is reported that at the G20 meeting in October, all parties will finalize the minimum tax rate for global companies and formulate a specific plan on how to distribute tax profit shares among countries. After completing the remaining technical work of the tax reform framework, this plan will be implemented in 2023. By then, how will the lowest tax rate for global companies affect the operations of multinational companies in China?
“The proposal seems to be a way for the Group of Seven (G7) countries to prevent larger and more profitable companies from moving to countries that provide more favorable corporate taxes than 15%.” The European Union Chamber of Commerce in China Finance and Taxation Working Group commented A reporter from China Business News said, “According to the information we currently have, the implementation of a global minimum corporate tax rate of 15% may have very limited impact on EU companies’ investment in China.”
Huo Jianguo, former dean of the Institute of International Trade and Economic Cooperation of the Ministry of Commerce and vice chairman of the China World Trade Organization Research Association, also told the CBN reporter: “In history, my country has adopted some tax reduction and exemption measures to encourage the expansion of the use of foreign capital, but After joining the WTO, my country’s taxation has been basically regulated. Now, except for the Hainan Free Trade Zone and some high-tech enterprises, there should be no tax reduction or exemption policies in other places.”
In addition to taxation, what other tools does my country have to improve the business environment in terms of absorbing foreign capital?
“Historically, other tools we have used include land. For example, to provide a little cheaper land. It is also a way to give some subsidies to buy land. In addition to the cheap land and tax policies, local governments can also help foreign investors. Companies need to train employees. For example, companies need to recruit and train, and the government can pay for employees to train, which is also considered to enhance the competitiveness of foreign-funded companies. There are many ways to provide dormitories, improve meals, and on-the-job education. Yes, anyway, we are fighting for welfare now.” Huo Jianguo said, “The first is to fight for costs, and the back is to fight for welfare.”
According to the latest data from the Ministry of Commerce, from January to May 2021, 18,497 foreign-invested enterprises were newly established nationwide, an increase of 48.6% year-on-year and an increase of 12.4% year-on-year. The actual use of foreign capital nationwide was 481 billion yuan (excluding banking, securities, and insurance), a year-on-year increase of 35.4% and a year-on-year increase of 30.3%.
Recently, Gao Feng, a spokesperson for the Ministry of Commerce, said in response to a question from a reporter from China Business News: “Since this year, my country has achieved rapid growth in attracting foreign investment, especially the number of newly established foreign-invested enterprises. This fully demonstrates that foreign investors have a strong interest in China. Recognition of the business environment and confidence in long-term investment in China.”
The epidemic will jeopardize the prospects for global economic recovery
In addition to tax reform, the third meeting of the G20 finance ministers and central bank governors spent a lot of time discussing the risks of the epidemic related to the global economic recovery and how to deal with them.
In terms of economic recovery, the G20 finance ministers and central bank governors meeting believed that thanks to vaccination and support policies, the global economic outlook has improved, but there are huge differences between countries and still face downside risks. The G20 calls for maintaining financial stability and fiscal and tax sustainability, and preventing economic downside risks and negative spillover effects.
In order to help fragile countries fight the new crown epidemic, the meeting supported the International Monetary Fund (IMF) in proposing a new round of special drawing rights (SDR) universal distribution plans with a scale of 650 billion U.S. dollars.
IMF President Georgieva said that the IMF Executive Board approved the proposal for a new round of US$650 billion SDR general allocation.
“This is the largest SDR allocation in the history of the IMF. The purpose is to meet the long-term global demand for reserves during the worst crisis since the Great Depression.” She said, “Now, I will submit a proposal for a new round of SDR allocation to The IMF Council, for its consideration and approval. If approved, we expect that the SDR allocation will be completed by the end of August.”
Georgieva said: “For the world, this will be a shot in the arm. SDR allocation will increase the liquidity of all member states, expand their reserves, build confidence, and improve the resilience and stability of the global economy. The 2009 SDR allocation has made important contributions to the recovery of countries from the global financial crisis. I believe that a new round of allocation will bring similar benefits.”
The communiqué also stated that the G20 is committed to ending the epidemic as soon as possible and supporting the fair and effective distribution of the new crown vaccine as a global public product.
The IMF pointed out that the global economy continues to recover, and the trend of recovery is broadly consistent with its forecast made in April that the global economy will grow by 6% this year. However, the divergence of the recovery process of various economies is getting worse.
The IMF warned that the world is facing a “dual track” recovery.
“In major developed economies and some emerging market countries, the economy is accelerating, thanks to strong fiscal and monetary policy support and the rapid spread of the new crown vaccine. But in many other countries, vaccines and infection rates are not available. Poor countries that are rising sharply have weak economic growth.” Georgieva pointed out that a highly contagious mutant virus is raging around the world. Therefore, the epidemic is still a fundamental risk facing the world.
She said that the world needs to speed up vaccination. By the end of 2021 and the first half of 2022, the vaccination rate in all countries will be increased to at least 40% to 60%, respectively.
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