G 20 approve concept for global minimum tax

“The G-20 countries decide to introduce the long-discussed global minimum tax.

Chancellor Merkel speaks of a “clear signal of fairness in the age of digitization”.

The global minimum tax is a done deal. The heads of state and government from the group of the twenty most important economic nations (G 20) approved the concept on Saturday in Rome, on which 136 countries had previously agreed. This was reported by Chancellor Angela Merkel (CDU) on the evening of the first day of the summit.

The topic was the economic recovery after the pandemic. “There is good news to report here. The world community has agreed on a minimum taxation of companies, ”said the CDU politician. “This is a clear signal of justice in the age of digitization,” she emphasized. She spoke of a "great success".

Scholz had pushed the project forward

Finance Minister Olaf Scholz (SPD), her likely successor, had pushed the project forward on an international level in recent years. It stands on two pillars. 

 

For one thing, some of the tax rights for the largest and most profitable companies will be transferred to the countries where they do business but often pay no taxes. So far, states have missed out if companies are not represented with employees, offices or machines. 

 

Individual countries had therefore introduced digital taxes without coordination, which was primarily directed against companies such as Amazon, Google, Facebook or Apple in America. This in turn raised concerns about countermeasures by the government in Washington. Part of the agreement is to withdraw such digital taxes or not to introduce them at all.

With the new regulation, taxation rights of 125 billion dollars will be redistributed, as the industrialized countries organization OECD announced a few weeks ago after completing the technical preparatory work. This affects around a hundred international companies, not just digital giants, but also highly profitable stock corporations, such as luxury goods manufacturers.

 

The second pillar of the reorganization is a global minimum tax of 15 percent. The OECD expects that the international community will earn a total of 150 billion dollars more. 

 

In a study for the Federal Ministry of Finance, the Ifo Institute in Munich estimates that the German tax authorities will receive up to 6 billion euros more in future with the global minimum tax. The ambitious schedule provides for the reform to come into force in 2023. For countries that have so far benefited greatly from tax competition, certain transition reliefs are planned."