Germany approves global minimum corporate tax

The German parliament on Friday approved the implementation of a global minimum corporate tax, as part of an international deal to ensure large companies pay a minimum tax rate of 15%.

Shoppers walk down Hohe Strasse shopping district in Germany.(Reuters)

Multinational firms will have to pay that level of tax on all of the profits they make worldwide, regardless of where the profits are generated.

In 2021 almost 140 countries agreed to an Organisation for Economic Cooperation and Development deal they are meant to implement from next year to prevent big companies like Alphabet’s Google (GOOGL.O) or Amazon (AMZN.O) avoiding taxation by transferring profits to low-tax countries.

This will apply to all such companies and large-scale domestic groups with turnover above 750 million euros ($800 million) per year.

The increase is expected to raise $220 billion globally for governments strapped for cash after the COVID-19 pandemic and struggling to ride out a cost-of-living crisis, although the ratification process has hit hurdles in various countries.

Last December the European Union member states agreed on a common directive to ensure uniform implementation of the tax within the EU, and that directive must be passed into national law in all EU countries by the end of the year.

The law was approved in Germany with the support of all the coalition parties and the main opposition party.

The Ministry of Finance estimated earlier this year that additional tax revenue of 910 million euros could be expected in Germany from 2026. In 2027 and 2028, the tax is forecast to bring in 535 and 285 million euros, respectively.

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