Italian Carabinieri stand guard on Piazza San Marco, a day before G20 finance ministers and central bankers meet, in Venice on July 8, 2021.
ANDREAS SOLARO | AFP | Getty Images
LONDON — A deal on global tax reform will be finalized “very soon,” German Finance Minister Olaf Scholz told CNBC on Friday, adding he hopes the tax changes could come into force by 2023.
“We are now really on the road [to a deal],” Scholz told CNBC’s Annette Weisbach. “We will reach an agreement here at the G-20 when the 20 nations are agreeing on the same idea of having an international global minimum taxation.”
“This will be a process that will finish very soon,” he added.
Taxation is under the spotlight this weekend as finance ministers and central bankers of the 20 most advanced economies in the world are gathered in Venice, Italy. Their aim is to hammer out a deal that will force the biggest multinationals in the world to pay more taxes.
This comes after 130 countries and jurisdictions agreed last week to sign up for a global corporate minimum tax rate proposal that the G-7 presented in June.
Under the deal, multinationals could be forced to pay a minimum tax rate of 15% wherever they operate, rather than only paying the majority of duties in the nations where they have their headquarters. This has allowed corporate giants to shift profits to countries with very low tax rates or with other accounting incentives.
“The change in the U.S. administration was a major breakthrough in this area and I am really confident that we will have the agreement we need to reach at this point in time here in Venice,” Nadia Calviño, Spain’s economy minister, said on Friday.
President Joe Biden’s administration has been pushing for a global agreement on taxation since taking office. Taxation is seen as one way to find new funding to deal with the economic shock from the coronavirus pandemic, while also addressing inequalities.
Wopke Hoekstra, the Dutch finance minister, also told CNBC that he is “optimistic” about a deal this weekend.
“What I hear from colleagues is that everyone is actually quite positive about this, so in all likelihood, we will be able to make additional progress,” he said.
However, a handful of nations are still skeptical about the agreement, notably Ireland and Hungary, and it is also unclear if Biden will be able to persuade a divided Congress about the merits of the deal.
When asked what would be offered to Ireland and Hungary to convince them to sign up to an agreement, Germany’s Scholz said that he was confident talks would be successful. He did not offer any specific details, however.
Ireland is known for offering a low corporate tax rate of 12.5% and the recent global tax agreement potentially challenges that. Hungary is in a similar position with a corporate tax rate of 9%.
Speaking to CNBC in June, Irish Finance Minister Paschal Donohoe said he wanted to find a “compromise” with international partners.
Another outstanding issue is the European Commission’s plan to introduce a digital levy in the near future.
When the G-7 agreed to a global corporate tax rate last month, it was also decided that taxes on digital services would come to an end to avoid double taxation. The executive arm of the EU — which has promised to find new revenue streams to pay for the debt incurred during the Covid crisis — is due to present a proposal for a new EU-wide digital levy.
The commission has said that this would be complementary to a global corporate tax rate, but the U.S. is worried the EU’s plans will derail progress.
Speaking to CNBC earlier this week, French Finance Minister Bruno Le Maire said: “I think there is a necessity to explain [to] the U.S. administration what is behind a digital levy,” he said, adding that it “has nothing to do with taxation on digital giants.”
— CNBC’s Sam Meredith contributed to this report.