A planned global minimum corporate tax of 15 per cent is a headache for the two Asian financial hubs, whose attraction owes much to their relatively low rates.

The ‘Patriotic Millionaires’ group said in an open letter that the wealthy should pay more for Covid-19 recovery.

The summit also confronted a two-track global recovery and heard pleas to boost coronavirus vaccination rates in poor countries.

Leaders from the major countries gather for the first face-to-face summit in two years, but a draft paper shows they are likely to only slightly toughen their pledges on climate action.

The Group of 20 (G20) major economies has vowed to support a sweeping overhaul of the global tax system, while keeping an eye on the ‘highly divergent’ pandemic recovery.

The agreement will bring sweeping changes to how big multinational companies are taxed and deter them from stashing profits in offshore havens.

Members of the Organisation for Economic Co-operation and Development (OECD) will meet on Friday to discuss new global rules to share tax revenues.

China is among 130 countries to back a plan by the Organisation for Economic Cooperation and Development to set a minimum corporate tax rate of at least 15 per cent.

The plan is being driven by the G20 and OECD and could make it harder for the likes of Apple, Google and Facebook to avoid paying tax in their home countries.

A 15 per cent minimum corporate tax has been hailed as a way to improve the fiscal positions of countries hit hard by the pandemic, but it could be years before tangible results are seen.

A new proposal for a global minimum tax is being scrutinised by businesses in Hong Kong, where a range of concessions allow some companies to lower their effective rate below 15 per cent.

A Group of 20 draft statement says policymakers are far from ready to give the all-clear signal on the pandemic and pledge ‘to use all available policy tools for as long as required’

With its relatively low 12.5 per cent corporate tax, Ireland does not want to lose out on foreign direct investment by agreeing to impose a 15 per cent tax on multinationals, but analysts say it might have little choice in the end.

While important details need to be hammered out, China appears to have put aside any major reservations to support a minimum global tax rate of at least 15 per cent.

Mainland China, Hong Kong and Macau are among the 130 countries and jurisdictions that have signed onto the plan, which will likely be formalised in the coming months but would not take effect until 2023.

Group of 7 agreed to a global minimum corporate income tax of at least 15 per cent in June, and now the broader agreement will go to the Group of 20 next week.

The global minimum tax rate proposed by the Group of 7 (G7) aims to clamp down on tax evasion and prevent countries from competing by offering lower taxes to attract multinationals. 

Group of 7 (G7) leaders supported a minimum corporate tax rate of at least 15 per cent on Sunday, with finance officials from the Group of 20 (G20) major economies – which includes China – set to focus on the US proposal when they meet in Venice in July.

Few obstacles stand in the way of China accepting a global minimum tax rate, analysts say, but the new rules could impact Hong Kong as a leading international tax haven.

The Biden administration’s plan has turbocharged negotiations at the Organisation for Economic Cooperation and Development (OECD) on how to overhaul tax rules.

Analysts say China’s strained relationship with the United States could also come into play in international negotiations on a global tax deal that analysts say could come to fruition in the coming months.