Finance ministers and central bank governors from G20 economies reached a historic agreement on a new global corporate tax reform plan over the weekend, endorsing a minimum levy on multinational corporations and a reallocation of profits between countries.
It marked a big step forward in the global tax reform process after years of discussions. After the G20 members finished meeting in Venice, Italy, on Saturday, they issued a communique calling the new framework "a more stable and fairer international tax architecture". However, the minimum corporate tax rate was not fixed.
Earlier this month, the global corporate tax reform initiative, which was designed as a two-pillar solution and proposed a minimum tax rate of 15 percent for large multinational corporations, won support from 132 countries and jurisdictions, including China. Experts expect the final plan could be approved at the next G20 meeting in October.
"This indicates that great progress has been made in the reform of the international corporate tax system," said Jeff Yuan, PwC Asia Pacific transfer pricing services leader.
"However, there are still uncertainties in the final plan, and we are not sure about the time for reaching a global consensus because a significant amount of political and technical work remains to be completed by October 2021, with key design issues still to be resolved."
China's strong economic fundamentals and institutional advantages can ensure that the country takes the lead in global tax reform, said Bai Yanfeng, a professor at the Central University of Finance and Economics in Beijing.
Compared with some advanced economies, which may take longer to implement the new rules, China is able to take action more effectively. As China is becoming the world's largest single consumer market, the country will also maintain its advantages in attracting international capital, Bai said.
"The most important thing is to do our own things well. When China's enterprises are competitive enough and consumers from all over the world pay more attention to China-made products, we will be full of confidence in both market share and tax share," Bai said.
Yuan said a July 1 statement by the Organization for Economic Cooperation and Development as well as the G20 communique made it clear that while implementing the new international tax rules, countries will remove digital services taxes and other similar measures imposed on companies. These removals will be good news for multinational enterprises, especially for high-tech businesses, Yuan said.
The new rules and their potential impacts still need deeper analysis. Multinational companies will need to conduct more impact analysis and scenario planning based on the information in the OECD's statement and revisit options on alleviating the potential impact of the new rules, he said.
Yi Gang, governor of the People's Bank of China, the central bank, attended the G20 meeting on Friday and Saturday via video-conferencing. Yi disclosed that the G20 Sustainable Finance Working Group, co-chaired by China's central bank and the US Treasury this year, is working on a draft plan on sustainable finance in the medium term.
This year, the group is focusing on tasks such as green finance and green industries, streamlining information disclosure and reporting standards related to the climate and environment as well as multilateral development supporting the Paris Agreement, according to a PBOC statement.
Yi called on G20 members to jointly improve standards for classifying and rating environmental, social and governance investments and improving climate information, which will help promote global green finance markets and foster low-carbon transition.
The G20 meeting also discussed central bank digital currencies for cross-border payments. It emphasized that no so-called "global stablecoins"－a new type of cryptoasset designed to maintain a stable value relative to specified assets－should commence operation, until all relevant legal, regulatory and oversight requirements are adequately addressed, according to the communique.
(Source: China Daily)