The global minimum tax for companies is getting closer: The leading industrial and emerging countries agreed in Venice on a global tax reform.
After “many years of discussions”, “a historical agreement on a more stable and fairer international tax architecture” has been reached. it says in the final declaration after the meeting of G20 finance ministers. It calls on those countries that have not yet agreed to the deal to rethink.
In a joint statement with US Treasury Secretary Janet Yellen that morning, Federal Finance Minister Olaf Scholz (SPD) declared that all countries had supported the plans for a global minimum tax at the G20 meeting. “We worked really hard in the past few weeks, but we made it,” said Scholz.
The planned minimum tax of 15 percent and the new distribution of taxation rights among the states should be implemented as soon as possible. “Our goal is for the agreement to come into force in 2023,” said the German finance minister. The final questions should be clarified by October this year. “That is very, very little time.” But we have come a long way. “All of this is really a big step forward.”
Under the umbrella of the industrial nations organization OECD, 131 states around the world have already approved the plans at working level. The minimum tax of 15 percent is intended to prevent companies from relocating their headquarters to low-tax countries and to prevent the states from lowering their company taxes in competition with one another.
Global corporations in particular shift their profits to countries with low tax rates – and therefore only have to pay comparatively low taxes. Patents or profits from license income are shifted within the group structure, sophisticated company structures ensure maximum tax savings – and this also in Europe, where tax-saving models such as the “Double Irish with a Dutch Sandwich” have become notoriously famous.
In the future, international companies should no longer only pay taxes in their home countries, but also where they do good business. This affects, among other things, large digital corporations, which up to now have often paid very little taxes overall – and often significantly less than medium-sized companies, for example. Emerging countries should get more tax revenue. Eight countries – including Ireland, Hungary and Estonia from Europe – refused to sign.
Scholz speaks out indirectly against the new EU digital levy
However, the EU Commission wants to present plans for a European digital levy shortly. According to EU Economic Commissioner Paolo Gentiloni, this will not be directed against American corporations and will not be comparable to a digital tax. According to experts, the USA has recently pushed the international negotiations on the minimum tax forward strongly in order to prevent a patchwork of numerous national digital taxes or similar charges.
At the G20 meeting, US Treasury Secretary Yellen urged an end to European digital taxes if the planned global tax reform is to be implemented. She hoped that the international agreement on a redistribution of taxation rights would make it possible to get rid of existing digital taxes, she said. In the EU, for example, France single-handedly introduced a digital tax as early as 2019. The USA under US President Donald Trump then threatened punitive tariffs.
Scholz also campaigned for a global solution – and thus indirectly spoke out against a European special path. The OECD tax reform already contains new rules for the hundred largest and most profitable corporations in the world, which will also affect many Internet companies.
The planned OECD tax reform is good for all countries, said Yellen. This will result in more income and end the race to ever lower tax rates. You will continue to campaign for other countries to join the agreement. “We will try that, but I should stress that it is not essential that all countries are on board,” said Yellen. The democrat must also promote the agreement in her own home country. Because for an agreement, Yellen would probably also need the blessing of the Republicans in Congress.
Additional income probably manageable
The additional income for the German tax authorities through the minimum tax should move within a manageable framework: According to calculations by the auditing and consulting firm Deloitte, it would probably bring the state an additional 700 million euros at most.
The agreement on a minimum tax is considered a historic step, but even with the blessing of the G-20, it is still a long way from reaching its goal. The success of the minimum tax depends not only on the specific form of the rules, but also on how many countries actually implement them – otherwise tax havens can circumvent the minimum tax in the future.