The global tax reform has taken the next hurdle, but now there are disagreements between Brussels and Washington over a planned digital tax in the EU: The finance ministers from the group of twenty large industrialized and emerging countries (G 20) are in favor of the planned minimum taxation and the redistribution of taxation rights for the largest and most profitable corporations in the world.

Now it is a matter of implementing the measures as quickly as possible so that they can take effect from 2023, warned Finance Minister Olaf Scholz (SPD) on the sidelines of the meeting with his counterparts in Venice.

“That is very, very little time.” But they have come a long way. “All of this is really a big step forward,” he said. This would end the trend towards ever lower taxes.

Manfred Schäfers

Business correspondent in Berlin.

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    America’s Treasury Secretary Janet Yellen literally stood by the side of the German politician.

    The planned tax reform is good for all countries, she said in a short joint appearance.

    There will be higher revenues for the countries, she stressed.

    You will continue to campaign for other countries to join the agreement.

    "We will try that, but I should stress that it is not essential that all countries are on board."

    Dispute over digital levy

    Nonetheless, 131 countries are now behind the concept, which 139 countries have negotiated under the umbrella of the industrialized countries organization OECD.

    In Europe, Ireland, Hungary and Estonia are still resisting the proposed reform.

    Cyprus, which is not represented in the working group, also has concerns.

    The G20 finance ministers speak of an historic understanding that will make the tax system more stable and fairer.

    They want to decide on a detailed plan for the implementation of the new regulation at their meeting in October.

    A cross shot from Brussels could now cause problems: The EU Commission is apparently not prepared to forego a digital levy in Europe.

    It is said that she would like to present her plans for it soon.

    In the words of Economic Commissioner Paolo Gentiloni, this is not directed against American corporations, and the project is also not comparable to a digital tax.

    Nevertheless, it has the potential to disrupt further work on the realignment of the tax world.

    America insists that all digital taxes will be reduced and that new ones will not be introduced.

    With a trick against Amazon

    The new tax world is based on two pillars. Firstly, a redistribution of tax revenue between the states in which the giants of globalization with the highest profits are located (home country, often America) and the countries in which they generate their income (market states). Today, the right to tax depends solely on whether a company has a branch or a permanent establishment in a country. When it comes to doing business over the Internet, the market states are left with nothing today.

    The second element is the infamous minimum taxation. It will not force every country to raise this rate, but it will work indirectly in this direction. If a country takes less than planned (at least 15 percent), other countries can collect the difference from the group companies. Or in the words of Scholz: If, for example, German companies pay only two percent tax abroad on their profits there, the German tax authorities will in future levy the difference to the new minimum tax.

    The first pillar is intended as a replacement for the unilaterally introduced or planned digital taxes. But there is one important difference: It is not only aimed at corporations with digital business models, but is more broadly defined. It's about everyone who initially has a turnover of at least 20 billion euros and a profit rate of at least 10 percent. For example, the French luxury group LVMH should also fall under the first pillar. With these companies, part of the taxation rights of profits exceeding the 10 percent threshold will in future be transferred to the market states. This should happen automatically based on the business parts.

    The broader approach is important to the government in Washington, and it also plays a major role for the corporations concerned. It was important to the Europeans to grasp the four giants in America. Amazon threatened to slip through. That is why they resorted to a trick: the group is mentally dismantled. The part that is so large and profitable in itself that it falls under the new regulation is included, the part that dilutes profitability is hidden.

    The effects of the new regulation should be manageable for the German tax authorities.

    In a study for the Federal Ministry of Finance, the Ifo Institute for Economic Research came to a range between 0.7 and 0.9 billion euros, as reported by the newspaper Welt am Sonntag.

    For comparison: In the last year before the Corona crisis, the total tax revenue in Germany was almost 800 billion euros.

    It is expected to rise to more than 900 billion euros by 2025.

    The study classifies a little more than 100 corporations worldwide into the group of German companies that will have to pay more taxes in the market countries in the future, including eight German companies: Ceconomy, Deutsche Telekom, Henkel, RWE, Bayer, SAP, Adidas, Deutsche Post.