International Internet companies Amazon and Google will soon have to pay taxes not only in low-tax countries. Federal Reserve Minister Scholes talks about the billions of euros that could flow to Germany.
Global Minimum Taxes and Taxation at Profitability: After many years of negotiations, key industrialized nations have agreed on the pillars of the global digital tax. “This is the final decision now,” Federal Reserve Minister Olaf Scholes said in London on Friday evening. “This is an improvement that we have been looking forward to for a long time and we have worked very hard for that.”
It was a good decision for Germany and the world, he stressed to the SPD politician on one side of the G7 finance ministers meeting. He spoke to British broadcaster Sky News about a “historic moment” that would change the world. Details are yet to be clarified.
Two pillar model
A model with two pillars is planned. On the one hand, it should control how many taxes multinationals have to pay – and where. So far, the tax is only payable at the company’s headquarters, but not in the countries where big companies like Google or Amazon make their sales. As a result, many companies have moved their headquarters to countries with lower corporate taxes. Global minimum tax, which should not be less than 15 per cent, is projected as the second pillar. The United States has put particular pressure here. This minimum tax is intended to put an end to the lowest tax rate in the world.
“We have to manage to end the tax competition,” Scholes said. The agreement on the G7, a group of seven leading industrial nations, is to be followed in the summer by the G20 agreement, a broad group of leading industrial nations. It should no longer happen that corporations pay through tax shelters or almost no tax, Scholes warned. In addition to Germany, the G7 currently includes Great Britain, the United States, France, Italy, Japan and Canada.
Given the huge amount of money countries have spent on epidemics to protect their citizens, jobs and economy, this is the right time to set such a course, Scholes said. The epidemic made it clear that economic reconstruction could not be financed if tax competition continued following the Corona crisis.
Scholes: “Substantial Extra Income”
The minister expects significant additional revenue. “Europe and Germany are benefiting greatly from the global minimum taxation, so we expect significant additional revenue, and as a result this is possible.” Germany benefits from taxation at the point of sale from the other pillar. He believes this will “lead to improvement in our income situation”. Scholes said fair taxation for large international corporations was a question of internal justice and important for synchronization.
Countries with lower corporate taxes, such as Ireland, are still reluctant to introduce a minimum tax. In the EU state, only 12.5 per cent corporate tax is payable, which is why many large companies are headquartered. If the digital tax is introduced, Ireland will have to raise taxes – or face fines from other economies. However, Scholes was confident that eventually all countries in Europe would agree to a global agreement.