FRANKFURT: 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.

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

       A senior US administration official, travelling with President Joe Biden, earlier called the plan a historic reshaping of the rules for the global economy that will force corporations to pay their fair share of taxes.

       That echoed previous comments by Yellen, whose support helped push forward a deal that languished during the administration of President Donald Trump.

       The pact won support in principle from 136 governments in October under the auspices of the Organisation for Economic Cooperation and Development (OECD).

       G-20 finance ministers endorsed a framework for the agreement in July.

       The G-20’s endorsement of the deal stands out at a summit that looks unlikely to produce any additional substantial agreements.

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

       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.

       While the deal has overcome some major impediments – such as getting low-tax Ireland to sign on – it faces several potential snags before it comes into force and proves effective, including the creation of a credible dispute resolution mechanism.

       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.

       The US and five European governments helped the agreement along with a side deal, announced Oct 21.

       It allows the European countries to retain, for now, so-called digital services taxes on technology giants like Facebook Inc and Amazon.com Inc, which US officials said unfairly discriminated against American companies. — Bloomberg