LONDON – A deal on global tax reform will be finalized “very soon,” German Finance Minister Olaf Scholz told CNBC on Friday, adding that he hoped the changes could take effect by 2023.
“We are now really on the road [to a deal]”Scholz told CNBC’s Annette Weisbach.” We will come to an agreement here at the G-20 when all 20 nations agree on the same idea of having international global minimum taxation. “
“It will be a process that will end very soon,” he added.
Taxation is in the spotlight this weekend as finance ministers and central bankers from the world’s 20 most advanced economies meet in Venice, Italy. Their goal is to strike a deal that will force the world’s largest multinationals to pay more taxes.
It comes after 130 countries and jurisdictions agreed last week to sign a global proposal for a minimum corporate tax rate that the G-7 introduced in June.
Under the deal, multinationals could be forced to pay a minimum tax rate of 15% wherever they operate, rather than paying the majority of duties only in the countries where they are headquartered. This has allowed giant companies to shift their profits to countries with very low tax rates or with other accounting incentives.
“The change in the US administration was a major step forward in this area and I am really convinced that we will have the agreement that we need to reach at this stage here in Venice “, said Nadia Calvino, Spanish Minister of the Economy on Friday.
President Joe Biden’s administration has been pushing for a global tax deal since taking office. Taxation is seen as a way to find new financing to cope with the economic shock of the coronavirus pandemic, while also fighting against inequalities.
Wopke Hoekstra, the Dutch finance minister, also told CNBC he was “optimistic” about a deal this weekend.
“What I’m hearing from my colleagues is that everyone is actually pretty positive about this, so in all likelihood we can make some further progress,” he said.
Opposition to the agreement
However, a handful of countries are still skeptical of the deal, including Ireland and Hungary, and it’s also unclear whether Biden will be able to persuade a divided Congress on the deal’s merits.
When asked what would be offered to Ireland and Hungary to convince them to sign a deal, Germany’s Scholz said he was confident the talks would be successful. However, he did not provide any specific details.
Ireland is known to offer a low corporate tax rate of 12.5% and the recent global tax deal potentially calls that into question. Hungary is in a similar situation 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 open issue is the European Commission’s plan to introduce a digital tax in the near future.
When the G-7 agreed on a global corporate tax rate last month, it was also decided that taxes on digital services would end to avoid double taxation. The EU’s executive branch – which has vowed to find new sources of revenue to pay off debt incurred during the Covid crisis – is due to present a proposal for a new EU-wide digital tax.
The commission said it would be complementary to a global corporate tax rate, but the US fears the EU plans will derail progress.
Speaking to CNBC earlier this week, French Finance Minister Bruno Le Maire said: “I think there is a need to explain [to] the US administration which is behind a digital tax “, adding that it” has nothing to do with the taxation of digital giants “.
– CNBC Sam meredith contributed to this report.