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A beaming Olaf Scholz
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ALBERTO PEZZALI / AFP
Olaf Scholz is proud, and rightly so.
On Saturday, the finance ministers from the G7 countries agreed in London on the introduction of a minimum tax of 15 percent for large international corporations.
This is an idea that the German finance minister put into circulation three years ago.
First he convinced his French counterpart, then other EU partners, then large parts of the rest of the world.
The SPD candidate for chancellor can use the success in the election campaign. Higher taxes, especially when it comes to multinationals, are always good for your own followers and large parts of the electorate. You don't need prophetic gifts to predict that Scholz will sing the song of praise for his merits in the coming weeks, following the motto: Great deeds need great self-praise. He is already raving about a "tax revolution".
It is not Scholz's merit that an agreement was reached this weekend among the established industrialized countries USA, Canada, Japan, France, Great Britain, Italy and Germany.
It is mainly because the United States made a U-turn under its new President Joe Biden.
Predecessor Donald Trump had blocked the project for years.
His re-election would have failed the project.
In this respect, Scholz was also lucky.
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Negotiations in London: G7 states agree on global minimum tax for large corporations
The measure is still a long way from being decided, but we have made great progress with the willingness of the major industrialized countries.
The next step is to convince a number of reluctant emerging economies in the G20.
They attract foreign companies into the country with low tax rates.
The governments of these countries have great reservations about a minimum tax.
After all, things could have been far worse for her.
Biden's new finance minister, Janet Yellen, recently discussed a minimum tariff of just over 20 percent.
In this respect, the low-tax countries have once again been lucky.
Even if all G-20 countries are on course, another hurdle will arise: 140 countries are currently negotiating the reform within the framework of the industrialized countries organization OECD, including many tax havens.
All of them need to be convinced, because the agreement only makes sense in a global context.
Time is running out.
The negotiations should be concluded in July.
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Proponents of the reform are trying to convince reluctant governments with a benign argument: They could agree to the agreement, but would not have to raise their tax rates. The new regulation only allows the home states of outsourcing companies to claim the difference between the foreign and minimum tariff. But the low-tax countries fear a competitive disadvantage. Many settlements could not happen if the investors later have to pay taxes anyway, they suspect.
Does that mean that international tax competition is about to end? That is far from certain. The success of the endeavor depends on how many states accept the new rules in the long term. In general, tax competition will exist as long as states have different economic and fiscal interests. It only takes a handful of tax havens that don't go along with them and continue to be satisfied with five or ten percent, and the lucrative business is preserved. As long as there is a gap between tax rates around the world, there will be tax-saving models that take advantage of it.
