Germany to Earn EUR 1.6–6.2 Billion in Additional Tax Revenue from Global Minimum Tax

“However, if low-tax countries subject these profits to the minimum tax themselves, the additional tax revenue for Germany will be limited to the effects of reduced profit shifting and will amount to EUR 1.6 billion per year. For their part, low-tax countries could raise taxes, or even levy the difference to the minimum tax rate of 15 percent as an additional tax,” says ifo researcher Florian Neumeier. While this would achieve the goal of reducing particularly blatant cases of tax avoidance, the additional tax revenue would primarily benefit the low-tax countries.

For the estimates, the ifo Institute had access to information from the country-by-country reports of all multinational corporations operating in Germany. The dataset included information from 3,613 multinationals, 434 of which are headquartered in Germany, for the years 2016 to 2019.

In October 2021, 136 countries backed the introduction of a global minimum effective tax rate of 15 percent. If a company’s effective tax burden in a given country is lower, then profits are taxed in arrears until the ratio of tax payments to profits reaches 15 percent. This applies to multinationals whose global sales amount to at least EUR 750 million. However, various aspects of the measure’s specific design are still open. For instance, agreement has yet to be reached on a precise definition of the tax base, and it has not been decided how to deal with loss offsetting.