Scholz confident US will strike international deal on corporate and digital tax

29 Jan 21

The new US administration is likely to cooperate with other countries in finding a solution to the issues around international corporation tax, German finance minister Olaf Scholz has said.

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Tax. Shutterstock 313474802

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Speaking at an OECD meeting about the tax reform discussions, which involve nearly 140 countries but which former US president Donald Trump’s administration withdrew from last summer, Scholz said he has spoken to the new treasury secretary.

“I'm sure the new administration is very much willing to find a solution in both pillar one and pillar two,” said Scholz, referring to the two main parts of the negotiations, dealing with an international minimum level of taxation and how to tax digital companies.

“When I spoke to [new US treasury secretary] Janet Yellen, I understood very much that there is a willingness to make reform happen in the short time we still have.”

Scholz said there remain differences to overcome, particularly on digital tax.

The US had withdrawn from talks, led by the OECD, in the interest of its large digital companies, such as Facebook, Amazon and Apple, which are all often accused of paying too little tax in the territories where they make their revenue.

Director of the OECD’s Centre for Tax Policy and Administration, Pascal Saint-Amans, said all firms will need to pay more tax where they operate, rather than simply where they are headquartered.

“After Covid, when [governments] have kind of nationalised companies’ salaries, by the government paying them, it would be quite unacceptable that companies would be able to locate their profits – when they're back to profits – in tax havens or in low-tax jurisdictions,” he said.

He added that from his discussions, “the US seems to be very much interested” in continuing the work, now that Joe Biden has taken over as president.

Many officials involved with the work fear a confusing global patchwork of unilateral taxes would emerge if talks fail, with some predicting the eruption of trade wars.

“It would be terrible for global taxation, but also terrible for the prospects of effective multilateralism, if we can't reach a deal on this,” said Canadian finance minister Christia Freeland.

“And I think we shouldn't understate the extent to which it is an open question whether the rules-based international order can keep going past Covid.

“We haven't done a great job of international cooperation on Covid. History is not going to judge us too well on that.”

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