G20 meeting in Venice: The next step towards a minimum tax

G20 meeting in Venice: The next step towards a minimum tax

Status: 07/09/2021 8:38 am

At the G20 finance ministers’ meeting in Venice, the global minimum tax will begin. That would be the success of Olf Scholes. But there are still high barriers.

Tobias Bets, ARD Capital Studios, is currently based in Venice

Venice has its own magic: the abundance of water, the silhouettes of bridges, the Grand Canal. Venice is a coveted place – but also a city of obsolescence. Floods threaten the sustainability of many buildings, and the facades collapse. “Like a lump of sugar in tea, Venice melts very quickly,” complained 19th-century English painter and author John Ruskin. Today, mega-cruise ships speed up the process.

Tobias Bets
ARD Capital Studio

SPD Finance Minister Olaf Scholes details details of his demand for a minimum tax for large corporations

Morning Magazine, July 9, 2021

Anyway: it’s going to be historic

The finance ministers of the world’s largest economies are in Venice for the weekend, the place of desire. There are also the United States, Europe, China and Russia. Here in Venice, finance ministers dream of global tax justice. G20 countries are likely to adopt a global minimum taxation.

If the G20 countries agree on a minimum tax for large corporations, some tax centers are likely to dry up. If they fail – or if they dilute the idea – the front is broken and trade conflicts threaten. Anyway: it’s going to be historic.

G20: Sholes’ next coup?

Even though US Treasury Secretary Janet Yellen was decisive, Federal Reserve Minister Olaf Scholes began his first coup on the issue. The strongest G7 countries have already ratified the minimum tax, with 131 of the 139 countries in the OECD now following it. “The effective global minimum tax agreement is a major step towards greater tax justice,” Scholes said last week. In the future, large corporations will play a fair role in financing the public good. “Now we will try to implement the results in Europe as soon as possible,” he said. For this he needs a clear and mandatory timetable from the G20 finance ministers.

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So far, companies have paid taxes on where they produce. Some people use a tactic: they claim that their licenses are in offices at tax centers. So some corporations pay a portion of their profits there in taxes. The tax reform now being planned should end it.

The minimum tax is based on two pillars

The reform is on two pillars. First pillar: Tax revenue must be redistributed. So far, the companies have mainly paid taxes in the country where they are paid. In the future, taxes will depend on what sales companies make. Apple or Google will have to pay more taxes in Europe, while German companies like Volkswagen and BMW will have to pay more in countries like China.

Planned international corporate tax reform

Cornelia Kolden, WDR Brussels, Morning Magazine, July 9, 2021

The second pillar: the global minimum tax for 15 percent of companies. Simply put, it works like this: if a group with a subsidiary pays less than 15 percent of the tax abroad, their own country can collect the difference. Transferring profits to tax centers will not be attractive.

Scholes mainly advocated for a minimum tax and promoted it along with France. This regulation is intended to end global tax investment. In any case, the meeting is beneficial for the finance minister. After all, he is concerned not only with the success of the subject, but also with the success of his aspirations to become Chancellor. This is because the SPD’s election campaign is entirely aimed at Scholes. Scholes has more government experience than Armin Lachett (CDU) or Annelina Bearbok (Greens), so the message of the Social Democrats.

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The minimum tax still has to overcome high barriers

But there are still high barriers. There are still a handful of dissidents. A shameful situation, because some opponents of the reform come from the European Union: Ireland, Hungary and Estonia. However, in Scholes’ Ministry of Finance, keynote speakers are sure to bring in a handful of opponents: “If 131 out of 139 OECD countries are in favor, then all G7 states and now G20 states support the reform, then a state that is blocking a global agreement that you want,” says a senior ministerial representative.

However, some countries, such as France, Italy and Spain, have to withdraw their own digital tax, which is part of the deal. However, observers expect countries that levy national digital taxes to hold on to them until global reform changes.

The US Congress has not yet decided

The situation in the USA is exciting. President Donald Trump has already implemented a national minimum tax for US companies active globally. But the Biden administration is taking a different approach. She wants to cooperate internationally and avoid the “America first” policy. This is one of the reasons why the US government wants to impose a minimum tax on global reform.

The biggest obstacle on this path is the US Congress. There will not be a clear majority in favor of an international minimum tax, because Republicans – backed by business associations – are fighting hard against higher taxes. The lower tax will not fail because of this; However, many states can cooperate. But without a strong USA, the plan would be like Venice: a lump of sugar in fast-melting tea.

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G20: Scholes wants to get points with voters with a minimum tax

Tobias Bets, ARD Berlin, present: Venice, July 9, 2021 at 8:50 am

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