Germany seeks global corporate tax deal with Biden administration

Germany seeks global corporate tax deal with Biden administration


German finance minister Olaf Scholz has said he will seek a deal with the incoming Biden administration on global rules for corporate taxation, as hopes rise in Berlin that the end of the Trump presidency will usher in a new era of multilateral co-operation.

Speaking at a Reuters conference in Berlin on Tuesday, he said the plan was to reach agreement by the summer on a tax blueprint unveiled last year by the OECD, the club of rich nations.

The set of principles put forward by the OECD in October, and strongly backed by Germany, would revolutionise the taxation of multinational corporations and raise an estimated $100bn in extra tax revenues around the world.

The OECD has sought consensus between more than 135 nations on the reforms, which it says would allow tax authorities to collect up to 4 per cent more corporate tax.

The goal of the OECD project is to ensure that multinationals, including highly profitable US tech groups and European luxury goods companies, pay corporate taxes on some of their profits where they do business, rather than where they register subsidiaries, while also introducing a global minimum rate of corporate tax to avoid a race to the bottom.

The plan has received strong support in Paris, Madrid, London and Rome, which argue that companies such as Apple, Facebook and Google profit enormously from the European market while making minimal contributions to national treasuries.

The question of whether to endorse the OECD blueprint will be one of the first tests of Joe Biden’s incoming administration. US opposition had been one of the main reasons that progress on a political agreement had stalled.

The US backed the process but in June last year it suspended talks with European countries, saying discussions had reached an “impasse”. US Treasury secretary Steven Mnuchin also threatened to impose tariffs on any countries that levied their own digital taxes.

The OECD approach has two pillars: it would allow countries to have some rights to tax profits made on the basis of sales in their jurisdiction. This would not just apply to US tech giants’ overseas operations, but would also give the US, for example, the right to tax European luxury goods companies.

The second pillar is a global minimum corporate tax rate. This would aim to prevent countries from lowering corporate tax rates in an attempt to lure company headquarters to their jurisdictions.

France refused to wait for other states to endorse the OECD approach and last year pushed ahead with its own digital services tax. In November, the French tax authorities began to demand millions of euros from US companies such as Facebook and Amazon in payment of the new tax for 2020.

Washington has condemned the French tax as an example of an unfair trade practice because it largely affects US companies.

It initially said it would retaliate by imposing a 25 per cent tariff on French handbags and make-up from January. But the US trade representative’s office said last week that it would suspend the tariffs and instead co-ordinate them with any tariffs that might arise from a series of investigations it has launched over digital taxes in other countries.

Mr Scholz has opposed the go-it-alone approach pursued by Paris and backed the OECD plans. Mr Scholz said last year that a deal would not only strengthen national budgets and limit tax evasion, but also help businesses by reducing legal uncertainty.

Additional reporting by Chris Giles in London



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