FRANKFURT: Leaders of the world’s largest economies have officially backed an ambitious plan to overhaul the way countries tax multinational companies with the aim of stemming competition for the lowest rates.

All leaders at a Group of 20 (G-20) summit in Rome on Saturday approved the new rules, “including a global minimum tax that will end the race to level business taxation to the bottom.” , said U.S. Treasury Secretary Janet Yellen. said in a statement.

A senior US administration official, traveling with President Joe Biden, has previously called the plan to overhaul the rules of the global economy that will force businesses to pay their fair share of taxes.

This echoed previous comments from Yellen, whose support helped push forward a deal that was launching during President Donald Trump’s administration.

The pact won the support in principle of 136 governments in October under the auspices of the Organization for Economic Co-operation and Development (OECD).

G-20 finance ministers approved a framework for the deal in July.

The G-20’s approval of the deal stands out at a summit that seems unlikely to produce further substantive deals.

Leaders have failed to make serious progress on other important issues, including climate change and debt relief for low-income countries.

The fiscal pact has two main objectives. It intends first to put an end to the efforts of multinational companies to shift their profits to tax havens with low tax rates thanks to a new global minimum tax of 15% for multinational companies.

It also attempts to address the increasingly digital nature of international trade by taxing companies, in part, on where they do business rather than where they make their profits.

While the deal overcame some major hurdles, such as Ireland’s low-tax membership, it faces several potential issues ahead of its entry into force and is proving to be effective, including the creation of a credible dispute settlement mechanism.

Signatory countries must also follow through by enacting national legislation to implement the new tax rules and formally approving a multilateral convention, to be drafted by the OECD.

The United States and five European governments have contributed to the deal as well as a side deal, announced on October 21.

It allows European countries to keep, for now, the so-called digital service taxes on tech giants like Facebook Inc and Amazon.com Inc, which US officials say constitutes unfair discrimination against the world. against American companies. – Bloomberg