Germany could raise extra US$7b with global minimum tax rate: Ifo report

Germany can hope to raise an extra 5 to 6 billion euros (US$5.8-US$6.9 billion) in taxes from large companies under the global minimum tax deal agreed last week, an unpublished study by the influential Ifo institute has calculated.

Assuming that the landmark agreement between 136 countries, which set a minimum global tax rate of 15% for big companies from 2023, reduces the transfer of profits to low-tax countries in the medium to long-term, the positive effects for the German tax authorities could reach 6-6.4 billion euros, it added.

The forecasts were in a report, seen by Reuters on Wednesday, by the Ifo Institute, which aims to help shape the economic policy debate in Germany and Europe with research to inform decision making by policymakers and business leaders.

Olaf Scholz, the German finance minister and chancellor candidate for the Social Democrats, has said that the minimum tax rate will have a noticeable effect, although he has not given any specific figures.

According to tax estimates from May, German tax revenues this year should reach a total 773 billion euros, of which 294 billions euros will be at the federal level.

Last week’s deal aims to end a four-decade-long “race to the bottom” by setting a floor for countries that have sought to attract investment and jobs by taxing multinational companies lightly, effectively letting them shop around for low tax rates.

The 15% floor agreed to is, however, well below a corporate tax rate which averages around 23.5% in industrialised countries. — Reuters

(US$1 = 0.8648 euros)

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