Rolf Bösinger, German Secretary of State for Taxation, explains, in an interview with “Echoes”, how Germany is approaching the next phase of consultation at the OECD on digital taxation.
Like France, Germany has supported the work of the OECD on digital taxation, while seeking to limit the negative effects on its tax base. In this country champion of exports, the prospect of changing the allocation of the tax in favor of countries of consumption worries. Rolf Bösinger, State Secretary for Taxation (SPD), explains in an interview with “Echoes” how Germany is approaching the next phase of consultation.
Digital taxation: how the new rules will affect France
Does the OECD proposal permanently address the weaknesses of the international tax system?
From the start, countries have come together within the OECD around the need to find a lasting solution to tax avoidance. We are facing two developments that deserve a multilateral approach: on the one hand, tax competition between states which pulls the tax bases down, and on the other hand, digitization which is gaining more and more companies. .
In this context, states are looking for security on their tax revenues, but companies also need visibility in order to plan for the long term. In this regard, we welcome the fact that the process at the OECD took a new step at the last meeting of G20 finance ministers in October. It was unexpected two years ago.
Germany and France have defended a common proposal for minimum taxation. Is it included in the OECD project?
Yes quite. The OECD has found a compromise integrating the different positions. In the second pillar, we find the principle of minimum taxation, which corresponds well to the joint Franco-German proposal.
The first pillar also creates a new right to tax companies without a physical presence. This causes us some concern, because it is important for exporting countries like Germany not to lose too much tax revenue.
You mean Google would pay more taxes, but VW would pay less …
In any case, we need to know what revenue we can count on with this new tax system. For this, calculation models are necessary to see how the tax base will evolve and to ensure a certain balance.
Does Germany manage to do this calculation? In France, work is underway, but it is very difficult …
The OECD secretariat has already put initial estimates on the table. In Germany, we will try to do our own cash flow mapping. It is not simple indeed, but it is important that we be able to carry out an evaluation of the consequences, according to the evolution of a particular indicator. Two or three economic institutes are working on the subject, including the Ifo institute.
If Germany loses, will you withdraw your support for the OECD plan?
No, we have always said that we aspire to a lasting solution and that we are willing to compromise. We believe that the stability of an internationally acceptable tax system is a priority. In the context of discussions with our partners, we just want to ensure that the definition of the bases continues to ensure equity between States.
Will this new system make winners and losers?
Early OECD estimates show that all major countries will benefit from the new system. We believe that revenues will increase overall, thanks to the minimum tax mechanism, inspired by the US tax reform, which provides for a minimum rate. A State must be able to make up for the tax differential if an incoming flow is not sufficiently taxed. In fact, this mechanism would mostly lead to losers among tax havens, which is indeed the objective.
Are tax-privileged countries like Ireland or Luxembourg going to play the game?
All states and businesses have an interest in stable tax revenues. This also applies to Ireland and Luxembourg. Switzerland also took part in the discussions. I am convinced that these States will find great interest in participating in the search for consensus.
Why did Germany not support France more in the Gafa tax project?
This reproach is incorrect. Germany fully supported the Commission’s project. However, several other member states immediately showed their opposition. It was therefore quickly clear that there would be no unanimity within the EU, unanimity necessary for tax matters. Finally, our position was not so far from that of Paris, since France had always said that it would end its Gafa tax in the event of an agreement at the OECD. Germany is banking on a long-term solution within the framework of the OECD.
Once the base is harmonized, competition on tax rates is likely to accelerate. Do we need a corridor for corporate tax rates as there is for VAT?
I do not believe in an acceleration of competition on corporate tax rates. On the contrary, the minimum tax mechanism will slow down this race, since no state will have any interest in going below the minimum rate. We will therefore no longer need to discuss a rate corridor.
The unanimity rule on tax matters has hampered harmonization within the EU. Should we come back to this principle?
Federal Minister Olaf Scholz has proposed to change this rule. It will not be easy, because the member states must act unanimously to reverse unanimity. All stakeholders must, however, be clearly in mind that Europe must retain its capacity to act, precisely because it is in competition with the United States or with Asia. Passing a qualified majority on tax matters would go a long way.
What has become of the Franco-German working group on taxation?
We exchange regularly within the framework of the meetings between our two ministers Bruno Le Maire and Olaf Scholz. We are currently working on a common European tariff for air transport.
Bruno Le Maire wants a carbon tax at the borders of Europe. What do you think ?
In the context of climate change, I am convinced that more work should be done on carbon pricing for air transport. In Germany, we will increase the air transport tax by 74% to reduce the incentive to fly. It would of course be a good thing to achieve a European solution in the field of air transport.
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France has carried out a lot of tax reforms over the past two years. How are they perceived in Berlin?
We have watched these developments with great interest. We believe that France is on the right track and that these reforms will give momentum to the entire European economy. It is important that states like France or Germany invest more in jobs and growth.
Bruno Le Maire thinks that Germany should invest more in this context of negative interest rates …
However, we have just announced an investment program of 150 billion euros by 2030, to which is added a plan for infrastructure of 400 billion euros. We are talking about a total amount of 550 billion euros, which is quite the same! Last year, we lowered household taxes by 10 billion euros and plan to do so again in 2021, to the tune of 15 billion euros. Germany is playing the game, both nationally and in Europe.