Germany Reaffirms Commitment to Minimum Tax on Multinational Corporations

Germany reaffirmed its commitment to the global agreement for a minimum 15% tax on the profits of multinational corporations, despite a recent exception made for U.S. companies. 

The announcement came from German Finance Minister, Lars Klingbeil, who addressed the matter during a joint press conference with French Finance Minister Eric Lombard near Berlin on Wednesday.

Klingbeil emphasized that both he and Chancellor Friedrich Merz are fully aligned in their support for the international tax framework, stating: “The Chancellor and I are united in our commitment to this global tax, and we will do everything in our power to keep this project on track.”

The issue gained significant traction last month when the G7 nations agreed to grant U.S. companies an exemption from the first pillar of the tax agreement. This pillar aimed to impose taxes on digital companies based on their customers' countries. The exemption was viewed as a major win for the Trump administration, which had heavily lobbied for such a concession.

Despite this, reports from German media on Tuesday revealed that Chancellor Friedrich Merz expressed skepticism regarding the future of the global tax initiative. However, Minister Klingbeil denied any internal disagreement, assuring that Germany remains committed to the broader project.

In 2021, approximately 140 countries reached a historic agreement under the Organization for Economic Cooperation and Development (OECD) on taxing multinational corporations. The agreement consists of two key pillars, including focusing on taxing companies, particularly digital ones, in the countries where their customers are located, and establishing a global minimum tax rate of 15% on profits.

Since returning to power, U.S. President Donald Trump announced his country’s withdrawal from Pillar One. Trump also threatened retaliatory actions against any nation that applies this provision to American companies.

Despite the U.S. exit from Pillar One, Pillar Two is still in effect in about 60 countries, including major economies such as Brazil, the UK, Canada, Japan, Switzerland, and European Union member states.

Klingbeil's comments highlight Germany’s ongoing efforts to preserve and implement the minimum tax system. This global tax framework is seen as an important step in addressing tax avoidance by large multinational corporations, particularly those in the digital sector.

While the U.S. exemption under Pillar One has raised concerns, Germany and other nations remain focused on the broader goal of creating a fairer tax system that prevents large corporations from exploiting lower tax jurisdictions.