In addition, major emerging economies are expected to receive more taxes from the largest and most profitable companies in the world. Finance Minister Gernot Blümel welcomed the agreement, the German Finance Minister Olaf Scholz spoke of a colossal step towards greater tax justice.
It is now expected that the G20 states with the most important industrial and emerging countries will give the green light at their meeting in Venice at the end of next week. The final details and a plan for implementation should then be clarified by October. The new rules should apply from 2023, which is considered ambitious and not yet secured.
For almost ten years the project has been negotiated under the umbrella of the industrial nations organization OECD, most recently by 139 countries. It was reported from negotiating circles that nine countries did not initially participate, including Ireland, Hungary and Estonia from Europe. There will be no major exceptions. All G20 countries are on board, including China, Turkey and Argentina after difficult negotiations.
Finance Minister Gernot Blümel (ÖVP) said he was pleased with the agreement, which would include around 90 percent of global economic output. “A global solution ensures that more fairness in taxation and between the countries is achieved. Austria will benefit to a considerable extent from the global tax reform”, it said in a statement.
“The thing is now on the track,” said Scholz. “I want to get hold of this agreement.” It is the biggest breakthrough on the international stage in the past 20 years. For Germany, the agreement will ultimately mean more tax revenue. “In the future, the big corporations will do their fair share of financing our common good.” This is particularly important for many countries after the corona crisis, because the pandemic tore huge holes in budgets and significantly increased debt.
US President Joe Biden said the deal would make the world economy “fairer for working class and middle-class families in the US and around the world”. US Treasury Secretary Janet Yellen spoke of a “historic day for economic diplomacy”. France’s Minister of Economic Affairs, Bruno Le Maire, spoke of the most important international tax agreement in a century.
The reform is intended to adapt the tax rules to the digital age. For decades, global corporations have been cleverly transferring profits to countries that are attracting ever lower tax rates – and in the end they pay comparatively little taxes, usually significantly less than medium-sized companies, for example. Technology companies in particular often shift profits from patents, software or license income that are based on intellectual property.
The planned minimum tax is intended to avoid tax dumping and is primarily aimed at tax havens. According to the OECD, this should result in additional income of around 150 billion dollars per year. The new US government had recently given impetus to the long and tough negotiations by proposing an effective minimum tax of at least 15 percent. Companies with an annual turnover of 750 million euros or more are asked to pay. According to experts, this affects 7,000 to 8,000 corporations worldwide, a few hundred of them from Germany.
In the other pillar of the reform, the so-called market states are to be better placed, where corporations like Amazon, Apple or Facebook do a lot of business but hardly pay taxes. These are supposed to get more than 100 billion dollars a year from the tax cake. “It aims to ensure that large multinational corporations pay taxes where they operate and make their profits,” said the OECD. “It also ensures urgently needed security and stability in the international tax system.” In this pillar, around 100 corporations with an annual turnover of more than 20 billion euros and a profitability of over ten percent are targeted. According to experts, this is likely to affect fewer than ten companies in Germany.
The financial sector is exempt from this partial regulation because it is usually regulated locally. Great Britain in particular, with its banking location in London, campaigned for this. The minimum tax also applies to large financial institutions.
There is a special regulation for Amazon, one of the big winners of the corona crisis. Actually, the US corporation as a whole is not profitable enough, but is still included in the redistribution of taxation rights, because individual divisions alone are large enough and also profitable enough. Germany and France had repeatedly emphasized that in the end there should be no loopholes for the Internet giants.
