Wednesday June 16, 2021
Global Tax Reform Plans
Germany would be a big winner
The G7 countries have already agreed on the main features of a global tax reform, the details still have to be negotiated. An analysis by economists already shows why Germany should have a great interest in the reform: Together with France, it is one of the beneficiaries.
According to a study, Germany would be one of the biggest beneficiaries of a global corporate tax reform in Europe. There will be significantly more winners than losers, according to the analysis by the British consultancy Oxford Economics. Overall, there would be a positive effect for the euro zone; in addition to Germany, the other heavyweights France, Italy and Spain in particular could benefit.
In 2028, the national debt in relation to economic output for Germany and France would each be around 1.4 percentage points lower than if the reform failed. It would be one point for Italy and 0.8 for Spain. All of them would be above the euro zone average of 0.4 percentage points. The seven leading industrial nations (G7) had recently agreed on a basic framework for the tax reform. The heart of this is a global minimum tax of 15 percent for companies. There is also a new regulation that countries with huge consumer markets should receive a larger share of the tax pie from particularly large and profitable corporations. Many detailed questions are still open.
The next few weeks should show whether the G7 agreement will last on a larger scale and whether it will be binding for almost 140 countries over the next few years. It has been deliberating on it for years. “But this time it looks different,” said the analysts from Oxford Economics. The coronavirus pandemic has a significant negative impact on the budgetary position of the states. Four European countries with low corporate tax rates in particular are likely to be among the losers from global tax reform – Luxembourg, the Netherlands, Hungary and Ireland.
.