By Michael Nienaber
BERLIN (Reuters) – German Finance Minister Olaf Scholz said on Thursday that efforts to introduce global rules on taxing digital giants such as Google <GOOGL.O>, Amazon <AMZN.O> and Facebook <FB.O> should not be derailed by the coronavirus crisis.
The Organisation for Economic Cooperation and Development (OECD) is developing rules to make digital companies pay tax where they do business, rather than where they register subsidiaries. This could boost national tax revenues by a total of $100 billion a year, the OECD estimates.
But the coronavirus crisis and forecasts of a deep recession in many industrialised nations have cast doubt on the OECD’s goal of reaching a deal among more than 130 countries this year.
Scholz, speaking at a political conference in Berlin, said the pandemic had underlined the urgency of improving international cooperation and boosting the capability of the public sector.
“We must work to ensure fiscal firepower and robust national budgets, in all countries. We must not allow some to avoid contributing their fair share,” Scholz said. “We must put an end to the harmful race to the bottom on corporate tax rates.”
Only small countries could hope to gain by undercutting the tax rates of their neighbours, Scholz added.
The OECD wants to set a minimum effective level at which companies would be taxed and is seeking agreement by the start of July, with an endorsement by the Group of 20 (G20) biggest economies by the end of the year.
A deal would not only strengthen national budgets and limit unfair tax evasion, but also help businesses by eliminating legal uncertainty and the threat of double taxation in different countries, Scholz said.
“An agreement will prevent an escalation of trade conflicts that unilateral steps would cause,” Scholz said – a reference to French plans to push ahead with a national digital tax if no broader deal is reached by the end of this year.
“And an agreement will support the long-term economic recovery across the globe after corona.”
Germany had originally planned to host a big OECD conference in Berlin in early July with the aim of sealing a tax deal.
A finance ministry spokesman said the topic was still at the very top of the international agenda, but that Berlin was considering whether the conference needed to be postponed because of the coronavirus pandemic.
A German official, who spoke on condition of anonymity, said there was a risk that the tax reform plan could now be put on the back burner because nobody could tell now how the world economy would look after the virus.
“Against this backdrop, it’s really difficult to agree on new tax rules just like that,” the official said.
Financial leaders from the G20 are expected to discuss global corporate tax reform next week, and it is also on the agenda of the spring meetings of the International Monetary Fund and the World Bank, which this year will be held virtually due to the pandemic.
(Reporting by Michael Nienaber; Editing by Alexander Smith and Editing by Kevin Liffey)