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Global tax overhaul is gaining steam as the G20 backs new taxes

“For the United States, it will be a fundamental shift in how we choose to compete in the world economy,” Ms Yellen said. “Not a competition based on the bottom line, but rather on our workforce skills, our ability to innovate and our core talents.”

Politicians continue to struggle with what the global minimum tax rate will be and what exactly will be subject to the tax.

A separate proposal requires an additional tax on the largest and most profitable multinational companies, those with profit margins of at least 10 percent. Officials want to apply this tax of at least 20 percent of profits, exceeding this margin of 1

0 percent for these companies, but continue to discuss how the proceeds will be shared between countries around the world. Developing economies are pushing to make sure they get their fair share.

Sir. Bradley from the hall said the details of a final deal would determine how punitive it would be for companies. Representatives from Google and Facebook have been in contact with senior Treasury officials as the process has unfolded.

U.S. companies are also worried about being disadvantaged with a 21 percent tax, as President Biden has proposed on their overseas profits, if their foreign competitors pay only 15 percent. The Biden administration also wants to raise the domestic corporate tax rate from 21 percent to 28 percent. Democrats in Congress are moving forward with legislation to make these changes to the tax code this year.

“If a U.S. company tries to compete globally with a significantly higher tax burden because of this significantly higher minimum tax on its activities, it’s a competitive issue to be successful,” said Barbara Angus, a global tax policy executive at Ernst. & Young.

Washington and Europe are also at odds over how to tax digital giants like Google and Amazon.

At the G20 summit, finance ministers expressed optimism that such obstacles could be overcome. In his closing press conference, after the agreement was reached, Daniel Franco, Italy’s finance minister, hailed the agreement as historic and called on those countries that have not yet taken part in reconsidering.

“Accepting global rules is difficult for every country. Every country must be prepared to compromise, ”said Franco. “Having worldwide rules for the taxation of multinational corporations, taxing profits of large corporations is a big change, it’s a big achievement.”

Liz Alderman contributed with reporting from Paris, and Eshe Nelson from London.

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