Within the framework of the BEPS project, the OECD intends to combat harmful tax competition by states and aggressive tax planning by international corporations. As a result, the BEPS project is currently discussing whether corporate profits should be subject to a minimum tax in the future. Recently, the G7 countries pledged to introduce this global minimum tax. The allocation of supplementary minimum taxation rights is the possible so-called second pillar. In addition, the reform of the nexus criteria relating to the original taxation rights with regard to § 9 AO and allocation standards as well as the introduction of a digital tax will be discussed. The concept was first addressed with regard to digital services. Nevertheless, it is far from being limited to digital services. Rather, all corporate profits should be subject to a minimum tax. This concept is described below. Furthermore, it is explained why the introduction poses problems for all participants.

BEPS stands for Base Erosion and Profit Shifting, in German for profit reduction and profit shifting. All OECD and G20 Member States have joined forces on this project. Fifteen action points were agreed. It also brought pillar two into play in connection with the taxation of digital services. This pillar promises a minimum taxation of international corporate profits.

The minimum tax under pillar two has several functions. As a result of the new tax nexus for digital services, which is strived for under pillar one, the residence seed loses the right to tax in principle. In order to ensure that international profits are not taxed at all or at a low level, minimum taxation should be introduced. As a side effect, the tax loss incurred by the resident states by the redistribution of the taxation right should be kept low. Ultimately, however, the minimum taxation should also apply to conventional services. Consequently, it also serves to curb the tax competition of the states. Furthermore, the aim is to prevent tax failures through aggressive tax arrangements.

The aim of the minimum tax is not to standardize the respective national tax rates. Therefore, no international tax rate is determined. However, profits from foreign subsidiaries should be subject to subsequent taxation if they are taxed abroad below a uniform minimum tax rate. Accordingly, these low-taxed profits are attributed to the parent company for tax purposes. The profits are then subject to further taxation in the country of residence of the parent company in order to achieve the uniform tax rate. This minimum taxation is to be applied in the case of a significant shareholding in the foreign company, i.e. a shareholding of more than 25 %. Furthermore, the minimum tax should only apply to companies with a turnover of more than 750 million. The euro is applied. Nevertheless, the determination of the basis of assessment of the retroactive taxation and the level of the minimum tax rate have not yet been definitively regulated.

You can prevent such a minimum tax. Among other things, it would be conceivable for domestic parent companies to relocate the profits attributed to them by the minimum taxation to a low-tax country where the minimum tax does not apply. This could be done by setting up a holding company above the domestic company, for example. License payments could then be made to them. However, this arrangement is to be prevented by the fact that payments to foreign affiliates are subject to a deduction ban if they are not sufficiently taxed abroad. As a result, payments are no longer deductible as operating expenses.

The deduction ban and the new minimum tax must not be undermined again by double taxation agreements between the states. Therefore, a new subject to tax rule is to be introduced. It is intended to regulate that in the case of payments which are not sufficiently taxed in the recipient country, the exemption in the country of residence is denied by the double taxation agreement.

The minimum surcharge tax is to be levied either by means of an independent additional taxation or via a supplementary taxation in the source country. In both proposals, however, the tax is calculated identically.

The concept proposed by the OECD for introducing a new minimum tax is critical.

Of particular importance will be the level of the minimum tax rate. Furthermore, it is questionable as to which tax rate is to be increased. Both the international minimum tax rate and the national tax rate applicable to the corresponding profits can be considered as a limit. Furthermore, all foreign profits could be added together and then the average tax rate could be compared with the minimum tax rate. In the following, the entire Group profit would then be retaxed. On the other hand, the tax rate in an individual country can also be decisive. Then only the individual low-taxed profit would be retaxed. In this proposal, however, it is questionable how the profits can be allocated to a particular country.

In addition, criticism can also be made with regard to the sense of the minimum tax. Developing and peripheral countries in particular often rely on low tax rates for companies to invest there. However, the large industrialised countries can now reduce tax rates considerably, as the minimum tax applies anyway and they therefore do not have to fear a loss of tax. Developing countries, on the other hand, are no longer able to reduce their tax rate because of the minimum tax, because they are taxed heavily anyway. From this point of view, it is worthwhile for companies to give up their headquarters in the developing country, as the tax advantage is no longer serious and a better infrastructure can be found in the industrialised countries.

There are also practical problems in implementing the minimum tax. The concept is to a considerable extent linked to cooperation between states. The more countries participate in the minimum taxation, the greater the effect of the minimum tax. Consequently, tax competition between states can in principle be successfully restricted. At the same time, however, this increases the benefit of disregarding the agreement. For this reason, it is questionable how such a concept should work in practice. On the contrary, the lack of regulations on minimum taxation shows that the countries are currently not in agreement.

Criticism can be made of the minimum tax. Ultimately, it depends on the cooperation of the individual states. It does not currently appear that compromises will be made here in the near future. What matters most is whether states such as Ireland participate in the concept of minimum taxation. Therefore, the introduction of an international minimum taxation of company profits in the near future is not yet expected. In addition, both the financial administration and those of the companies are expected to face considerable administrative burdens. It is questionable whether this effort will be accepted.