For years, countries around the world have been undercutting each other in corporate taxes.
This should now end: The G20 countries are behind a major, global tax reform.
Venice - Vice Chancellor Olaf Scholz stands on the Venice lagoon and promises: "That will make the world better."
He is proud: The major industrial and trading countries agreed on Saturday to dry up tax havens around the world and to demand more taxes from large digital companies.
In the end there was applause from the scene, reports the SPD politician.
For years, the German finance minister had been one of the driving forces behind the reform internationally.
Its aim is to turn a system inside out that is no longer up-to-date after around 100 years.
THE PROBLEM
In the past few decades, countries around the world have been caught in a race to the bottom: In the struggle to attract large companies, they have continued to lower their corporate taxes.
"This is a race that no one has won," says US Treasury Secretary Janet Yellen.
Instead, it has taken resources from the countries that they would actually have better invested in the citizens and infrastructure, i.e. in schools, hospitals or retirement.
Ultimately, global corporations - especially large digital companies such as Amazon and Google - often paid hardly any taxes because they shifted profits to tax havens or saved billions with tricks.
That is unfair compared to the small craft business or the bookstore around the corner, according to the German Ministry of Finance.
THE SOLUTION - TWO PILLARS
Two innovations are now planned: All internationally active companies - regardless of where they are based - should pay at least 15 percent tax. No tax rate is prescribed to any state. But if a company with its subsidiary pays less taxes abroad, the home country can collect the difference. So it would no longer be worthwhile to shift profits to tax havens.
The second part of the reform deals with the distribution of the tax cake among the countries.
Large companies should no longer be taxed only in their mother country, but also where they make good profits.
This affects, among other things, the digital corporations who make high profits through Internet sales or advertising clicks even where they have no branch.
According to the previous rules, they don't have to pay taxes there.
That should change - but the exact formula for the distribution is still being worked on.
CONSEQUENCES FOR GERMAN COMPANIES
The new distribution rules should only apply to large and highly profitable corporations.
It is unclear how many German companies are included.
A study by the Ifo Institute for the Ministry of Finance, quoted from “Welt am Sonntag”, lists eight companies: the electronics retailer Ceconomy, Deutsche Telekom, Henkel, RWE, Bayer, SAP, Adidas and Deutsche Post.
However, the large American digital corporations such as Google and Apple, which would then have to pay more taxes in Europe, are likely to be more severely affected.
Germany would probably not have to adjust its corporate taxation.
Because companies in this country are already paying 30 percent more than the planned minimum rate of 15 percent.
In eleven other EU countries, on the other hand, there are currently company taxes of less than 15 percent, according to EU Economic Commissioner Paolo Gentiloni.
WHAT JUMPS OUT FOR GERMANY
The Organization for Economic Cooperation and Development (OECD) expects the minimum tax alone to generate additional tax revenues of $ 150 billion worldwide.
The redistribution could bring the so-called market states again more than 100 billion.
There are no reliable figures for Germany: The Ifo scientists are reckoning with 0.7 to 0.9 billion due to the redistribution; according to EU figures, the minimum tax could bring in 5.7 billion euros for Germany.
HOW IT GOES ON
131 of the 139 OECD countries have already given their approval at working level, including well-known tax havens such as the Cayman Islands. The three EU states Ireland, Estonia and Hungary, on the other hand, have so far refused - probably also because their business model is low corporate taxes. Ireland's Finance Minister Paschal Donohoe fears that his country could lose a fifth of its corporate tax revenues. In Scholz's ministry, however, one is sure that the three can still be "brought into line".
Following the decision of the G20 states, detailed questions should now be clarified.
Among other things, there is still a struggle about how exactly to define corporate profits.
Some countries like France would also like a higher minimum tax rate.
Scholz wants the reform to come into force in 2023.
A multilateral international agreement is to be concluded for the new distribution rules.
The minimum tax must be implemented individually in the states.
THE TRUMPERS
Scholz is certain that nothing will go wrong anymore.
But not only the three EU deviants could become a problem, a clear majority in the US Congress has not been identified either.
A bigger problem, however, could be national digital taxes, which exist in France, Spain and Italy, for example.
For a clean deal, they would have to be withdrawn.
Yellen - with cautious support from Scholz - also issued a warning in Venice.
Economic Commissioner Gentiloni wants to stick to EU plans for a digital levy, as he told the newspapers of the Funke media group.
"We will submit the proposal shortly," he promised and emphasized: "Our plan is not directed against American corporations."
THE LOOPHOLES
It is uncertain whether the reform can really slow down the competition for the settlement of large companies. Because nobody forbids the states to lure companies with other facilities. For example, lower social security contributions, lower property taxes or high research grants and settlement grants would be conceivable. dpa