Digital tax: G20 countries want agreement on tax reform by the end of 2020

The world's most important industrialized nations want to agree on minimum global taxation for international corporations by the end of this year. It should be one by the end of 2020 "consensus-based solution" was given on February 23 in the seven-page final report (PDF) the meeting of finance ministers of the leading industrialized and emerging economies (G20) in Saudi Arabia's capital Riyadh. The basis for a political agreement on principles should be laid by July. Then a group led by the industrialized countries organization OECD meets in Berlin. "We reaffirm the importance of international cooperation to complete this work and ensure tax security", it says in the communiqué.

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Germany, France and other European countries campaigned for this schedule at the meeting. "This year we have to make a decision"Finance Minister Olaf Scholz (SPD) said. French finance minister Bruno Le Maire also called for a compromise by the end of the year. Her American colleague Steven Mnuchin, on the other hand, is said to have been less than impressed. The United States is particularly critical of the increased taxation of digital companies.

Specifically, two weak points in the tax system are to be eliminated: A global minimum tax should make the flight of large corporations in tax havens unattractive. In addition, large digital companies such as Google, Amazon or Apple should be taxed more appropriately. These companies make huge profits in regions where they have no official headquarters. According to estimates, this means that they don't even pay half as much tax as traditional industrial companies. In March 2019, the G20 countries agreed in principle on a global minimum tax at a meeting in Japan.

Scholz "cautiously confident"

Scholz, Le Maire, Spain's Minister of Economy Nadia Calviño and Italy's Finance Minister Roberto Gualtieri all called for rapid progress on Saturday. "Failure to act now would lead to arbitrary results and increase the fragmentation of the global tax system"wrote the ministers in a paper, Among other things, it states: "It's about a lot of money – many billions of euros in tax revenue for the construction of schools, hospitals and modern infrastructure are at stake. Above all, however, it is about the legitimacy of the state and our democratic values. We have to act decisively, quickly and together. "

Scholz explained that he was "behave confidently" for a solution later this year. A postponement brings with it international conflicts. International minimum taxation is central. But that also includes a solution for digital companies. Le Maire also emphasized that it was about a package solution – even if the minimum taxation would bring the greater income to the states.

USA against digital tax

The United States has no problem with a minimum tax. The US government, on the other hand, finds the plans for a global digital tax problematic – because it would affect many American companies. The United States had therefore made a weakened proposal in which the corporations had the choice of submitting to the new system or not. Mnuchin said on Saturday that if everyone accepted the US proposal, nothing would stand in the way of a quick settlement.

The digital companies themselves are already preparing for higher taxes. Facebook boss Mark Zuckerberg supported the reform plans of the OECD at the Munich Security Conference. "And we accept that this could mean a new set of rules, that we will pay more taxes in the future, in different countries."

Because the reform made little progress internationally, several countries such as France and Spain have recently introduced their own digital taxes. After the US threatened punitive tariffs, they suspended them until the end of the year. OECD Secretary General Ángel Gurría warned in Riyadh against going it alone. "If it stops getting out of hand, a cacophony of unilateral measures stops"he asked. National digital taxes inevitably created tensions in trade and could have a major impact on the global economy.

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