Finance ministers and central bankers from G20, the countries with the 19 biggest economies and the European Union, green light a "revolutionary" deal to tax multinational companies more fairly.

Venice talks have been an opportunity to thrash out further details and exert pressure on those that have not yet signed up to the deal.
Venice talks have been an opportunity to thrash out further details and exert pressure on those that have not yet signed up to the deal. (AFP)

G20 finance ministers meeting in Venice have given their backing to a "historic" deal on global tax reform, which includes a minimum corporation tax rate of at least 15 percent.

On Saturday, the ministers also called on other countries to join them in the deal to achieve "a more stable and fairer international tax architecture". 

A framework for global tax reform, including a minimum corporate rate of 15 percent, was agreed by 131 countries earlier this month.

It aims to prevent a race to the bottom as countries compete to offer the lowest tax rates to attract investment, with many multinationals as a result paying derisory levels of tax.

"If there is a deal today, there is no turning back. It will be implemented... it's a kind of tax revolution," French Finance Minister Bruno Le Maire said on Saturday before the deal was agreed on.

He earlier said that the minimum tax rate, which could be in place by 2023, "must be ambitious", with his country, the United States, and Germany among several nations pressing for a higher rate.

But finance ministers and central bankers from the G20, the countries with the 19 biggest economies and the European Union, are not expected to go further than the 15 percent agreed on July 1.

Germany says deal 'will be finalised shortly'

Final agreement is not expected until the run-up to the G20 leaders' summit in Rome in October.

But the Venice talks have been an opportunity to thrash out further details and exert pressure on those that have not yet signed up to the deal, struck under the auspices of the Organisation for Economic Cooperation and Development (OECD), a club of 38 wealthy economies.

Aid agencies including Oxfam also argue that 15 percent is too low, but some nations are opposed even to this, including EU member Ireland, which lured Apple and Google to Dublin with its low tax rates.

"We are really now on the way" to a deal that "will be finalised shortly", German Finance Minister Olaf Scholz told CNBC television on Friday.

The minimum rate is expected to affect fewer than 10,000 major companies, but the OECD estimates an effective 15 percent rate would generate an extra $150 billion in revenue per year.

The measure is one of two so-called pillars of global tax reform that have been under negotiation for years, but which have been given new impetus under US President Joe Biden.

The other would give countries a share of the taxes on profits earned in their territory. Multinationals operate in many countries -- oil giant BP is present in 85, for example -- but usually pay taxes on profits only in tax domiciles cherry-picked for their low rates.

It would initially apply to the top 100 or so companies, and is targeted at the most aggressive users of tax-reducing domiciles, such as technology giants Google, Amazon, Facebook, and Apple.

According to a draft obtained by AFP news agency of the final statement, which is still being discussed, the G20 ministers will "endorse" the OECD's "historic agreement on a more stable and fairer international tax architecture".

Aid to poorer countries

The G20 ministers are meeting for the first time in person since February 2020, at the start of the global coronavirus pandemic, although China and India are only attending virtually.

Hundreds of protesters were expected to converge on Venice later, although the Arsenal area of the lagoon city, where the meeting is being held, is cordoned off to the general public.

The G20, whose members represent about 85 percent of global wealth, are also discussing climate change and the economic recovery from the pandemic, particularly how to ensure that poorer countries are not left behind.

The ministers are expected to endorse an initiative by the International Monetary Fund to urgently increase aid to countries struggling to cope with the pandemic through special drawing rights, which are international reserve assets.

Source: AFP