Minimum tax - G20: Ministers discuss global minimum tax

The finance ministers of the G20 group will meet in Venice this Friday and Saturday. One of the items on the agenda at the meeting is a global minimum tax. According to the Organization for Economic Cooperation and Development (OECD), 131 countries have already agreed on the project, which aims to tax globally operating companies more fairly.

The G20 have also spoken out in favor and should now officially confirm the plan at the meeting in Venice. However, negotiations are still ongoing to bring low-tax countries on board. The EU member states Hungary, Ireland and Estonia have not yet joined. However, the approval of these countries is important for the European Union, as the introduction of a global minimum tax in the EU requires unanimity. The G20 group includes the 19 most important industrialized and emerging countries and the EU. 

Additional income for Austria

131 countries have paved the way for a global minimum tax of 15 percent to make tax dumping more difficult. In a further pillar, digital companies such as Amazon, Apple, Facebook and Co are to pay taxes not only in their home countries, but also where they do good business but are hardly taxed. Local experts see “still a lot of question marks”, especially when it comes to the second point. Tax revenue in Austria is likely to increase overall.

"It is of course a departure from previous tax principles," says business lawyer and tax law expert Katharina Kubik (Freshfields Bruckhaus Deringer). "Taxation rights between states are being reorganized, allocation rules in international tax law are being changed," explains lawyer and tax advisor Paul Doralt (Dorda Brugger Jordis) about the so far less illuminated pillar of the 131-country unification under the aegis of the Organization for Economic Cooperation and Development (OECD). Because so far, profits have been taxed where the company is based. In the future, however, around 100 corporations with an annual turnover of more than 20 billion euros and a profitability of over 10 percent will also pay taxes in this pillar where they are active.

Doralt and Kubik believe that there is still much to be negotiated here and point out that the OECD has announced more details for autumn. So far it is only known that a fairer distribution of taxes between producer and consumer countries is planned. “Basically, this helps poorer, less exporting countries,” says Doralt. “Double taxation agreements will have to be rewritten, for example when Austria gets the right to tax local Facebook sales.” On the other hand, it remains to be seen whether this will also arouse covetousness in the USA, for example domestic energy drink producers who do good business there tax, the lawyer points out.

Only two companies in Austria affected

Only two companies from Austria have a turnover of more than 20 billion euros. These are OMV and Porsche Holding Salzburg. Exceptions are provided for the raw materials industry, so OMV should not be included.

"According to the OECD, a melting of the turnover thresholds is planned over the years", emphasized tax lawyer Kubik. "In principle, the tax system is being further developed and adapted to current conditions in economic life, in which physical presence is not necessary to be successful."

Austria can expect additional tax revenue, according to Kubik, even if the new rules are likely to lead to the end of the domestic digital tax. For corporations, it won't be easier when it comes to compliance rules. Doralt still expects "very tough negotiations". How much more the domestic treasury could take remains to be seen, both experts emphasized to the APA.

Both experts expect little impact on Austria's tax revenue from the pillar of the global minimum tax of 15 percent, which has so far been more publicly debated. In this country there are already many measures against sneakers. “There will still be tax havens, but it will probably become impossible to transfer profits to such,” says Doralt. In Austria there has been a rule for five years, according to which profit shifting payments are not tax-deductible in this country if they go to a company that is taxed at less than 12,5 percent, “so that no funds can be shifted”. Incidentally, he does not believe, like some critics, that because of the minimum tax rate, many states could level their corporate taxes down to this value.

A new EU directive will also be necessary for the implementation of these regulations, said Kubik. And since Ireland, Hungary and Estonia were not part of the OECD agreement, a tug-of-war can still be expected here in the EU. The expert also emphasized that the global 15 percent tax rule could end the current patchwork of different regulations.

Today, Friday and Saturday, the G20 meeting in Venice is dedicated to a global minimum tax. The topic is on the agenda.