BERLIN (Reuters) - German Finance Minister Olaf Scholz welcomed on Tuesday a pledge by U.S. Treasury Secretary Janet Yellen to work on a global corporate minimum tax rate, adding that a deal among more than 140 countries could be possible by summer.
"I'm in high spirits that with this corporate taxation initiative, we'll manage to put an end to the worldwide race to the bottom in taxation," Scholz said. He added that any deal must include new rules how to tax cross-border business by digital tech giants.
Yellen said on Monday that she is working with G20 countries to agree on a global corporate minimum tax rate and pledged that restoring U.S. multilateral leadership would strengthen the global economy and advance U.S. interests.
As part of an overhaul of U.S. corporate tax, the Biden administration wants to set a minimum tax on U.S. corporations of 21% no matter where they earn the income being taxed, up from 10.5% currently.
Countries are negotiating a global minimum corporate tax rate at the Organisation for Economic Cooperation and Development to discourage big multinationals from being able to legally book profits in low-tax countries like Ireland regardless where their income is earned.
The proposed U.S. minimum is higher than what has been discussed so far at the OECD, which has been closer to 12.5% and happens to be the current Irish corporate tax rate.
A French Finance Ministry source said that it was far from certain that the proposed 21% U.S. minimum would make it through Congress.
"It won't necessarily be the reference rate for the minimum tax that gets decided at the OECD," the source said.
"We think that the shift in the American administration's position can breathe new life into negotiations with European countries with extremely low rates," the source added.