JOHANNESBURG: G20 leaders have committed to engaging constructively to address concerns regarding global minimum tax and tax challenges arising from digitalisation of the economy, while preserving the tax sovereignty of all countries.
In a declaration issued after the G20 Summit in South Africa, leaders of 20 developing and developed nations also called for a new OECD framework that will enable interested jurisdictions to strengthen international tax transparency on immovable property on a voluntary basis.
“We will continue engaging constructively to address concerns regarding Pillar Two global minimum taxes, with the shared goal of finding a balanced and practical solution that is acceptable for all as soon as possible,” said the G20 Summit declaration.
The Organisation for Economic Cooperation and Development (OECD)’s pillar 2 initiative sets a minimum tax rate of 15 per cent for every country that is signatory to it. There are concerns that the US domestic tax rules might conflict with this new global minimum tax.
US President Donald Trump on January 20 in a Presidential memorandum had said that the “Global Tax Deal has no force or effect within the United States”. This has led to countries evaluating the benefit of joining the tax deal with the US not being a part of it.
The G20 declaration said that the delivery of a solution will need to include a commitment to ensure any substantial risks that may be identified with respect to the level-playing field are addressed and will facilitate further progress to stabilise the international tax system, including a constructive dialogue on the tax challenges arising from the “digitalisation of the economy”.
“These efforts will be advanced in close cooperation across the membership of the OECD/G20 Inclusive Framework (IF), preserving the tax sovereignty of all countries,” the declaration said.
It further said there is an opportunity for the OECD/G20 BEPS (Base Erosion and Profit Shifting) Project come with a new OECD framework that will enable interested jurisdictions to strengthen international tax transparency on immovable property on a voluntary basis.
The G20 leaders agreed that domestic resource mobilisation is the most effective funding source, and a structured approach to reform which is “country-owned, country-led”, while fulfilling the social contract with taxpayers would be valuable.
PTI