At the G20 finance ministers’ meeting today, the global minimum tax for companies will be formally approved. MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“The approval of the minimum tax by the G20 finance ministers is an important achievement when it comes to curbing global tax dumping. However, further steps are necessary. The minimum tax by no means solves all problems in the international tax area. The minimum tax is a step forward on a long road to more global tax justice. The new rules apply to the largest corporations worldwide, but tax avoidance of other companies will continue. We need an effective minimum tax rate for all companies, not just for the largest corporations. Letterbox companies must also pay their fair share.
The harmful monopolisation of the digital economy will continue even with a minimum tax. The regulation of the digital economy is central to achieving fair competition between digital giants and local retailers. The taxes paid by the retailer Amazon will remain low even with the minimum tax. At most, Amazon’s cloud services as a highly profitable segment will fall under the agreement on the international corporate tax reform, but not Amazon’s immense retail business, because Amazon reinvests its enormous profits from the mail order business and thus avoids taxes. Retail in our inner cities hardly stands a chance against Amazon’s practices. We should not apply two different tax standards when it comes to the analogue and the digital economy. Antitrust law, labor market policy and social security must also make a contribution to fair competition between analogue and digital business models. The digital economy must not lead to the death of inner cities.
The minimum tax is not enough to significantly reduce global inequalities. The redistribution of excess profits to the countries in which digital corporations exercise market power is too low. Developing countries get too little of the global tax pie. The fight for global tax justice is far from over. “
The most talked about part of the agreement is the global minimum tax. Strictly speaking, however, this is not a minimum tax, but rather a top-up tax for foreign subsidiaries of large corporations. Under the so-called income inclusion rule, the income of foreign subsidiaries is taxed at the parent company if there is a difference between the effective tax rate abroad and the internationally set effective minimum tax rate of 15 percent. The difference is then covered by the top-up. Since this is a top-up tax, EU member states can implement it even without European agreement, as long as they include domestic and foreign subsidiaries equally.