Leaders of the world’s biggest economies formally backed an ambitious plan to overhaul the way countries tax multinational companies in a bid to stem competition for the lowest rates.
The tax pact has two sweeping objectives. It intends first to halt the effort by multinational companies to shift profits into low-tax havens through a new global minimum tax of 15% for multinational companies. It also attempts to address the increasingly digital nature of international commerce by taxing companies, in part, on where they do business instead of where they book profits.
Signatory countries must also follow through by enacting domestic legislation to implement the new tax rules and by formally approving a multilateral convention, to be drafted by the OECD.