Three EU countries have thrown the bloc’s efforts to introduce a global minimum corporate tax rate of 15 percent within 12 months into disarray.
Finance ministers from Estonia, Hungary and Poland protested on Tuesday the planned timetable, which G20 countries agreed to in October as part of a wider overhaul of corporate tax rules.
The ministers also demanded the initiative be contingent on the rollout of a global levy on the world’s 100 biggest companies, due to be rubber-stamped in June and introduced in 2023. Their concern is that U.S. President Joe Biden will fail to find the Congressional support he needs to implement the same rules, leaving Europe at an economic disadvantage.
The protests from Tallinn, Budapest and Warsaw pose a serious challenge to the EU’s bid to implement the rules in a timely fashion, as EU tax agreements require unanimous support.
Estonian Finance minster Pentus-Rosimannus told national broadcaster ERR that: "the current proposal for a directive does not leave EU member states free to decide whether to apply a minimum tax at national level to companies above €750 million – an agreement at OECD level actually provided for this possibility, so the European Commission has gone beyond the agreement here,"
The tax rate, known as Pillar 2, is part of a two-pronged global agreement that the Organization for Economic Cooperation and Development (OECD) brokered last fall to obliterate tax havens and ensure that the world’s multinational firms — including tech giants — pay their fair share in tax. The other part of the package, called Pillar 1, would require that the biggest firms pay tax on where they operate, not where they’re based.
The European Commission translated Pillar 2 into an EU bill in late December in the hope of a swift agreement within the coming months. A bill for Pillar 1 is set to come in July after global policymakers have agreed and signed a “multilateral convention” at the OECD.
A delay would also tarnish the bloc’s global image as a faithful enforcer of international agreements against tax dodging — a prospect that French Finance Minister Bruno Le Maire struggled to swallow.
“You can’t accept an accord from the OECD, and when that accord is written into a directive, exactly with the same terms, say the accord is not valid anymore,” the Frenchman said ahead of the meeting, which he’ll chair for the next six months as part of a rotating six-month EU presidency. “There’s something incomprehensible there.”
“We spent almost five years to find an agreement at the OECD on international taxation,” Le Maire added. “I think that the EU has to show that it is capable to take the leadership on this subject and to adopt the directive quickly.”
Tallinn, Warsaw and Budapest were alone in their open calls for linking the OECD’s two pillars as a hedge against the U.S., as the two initiatives are legally independent from one another. But the Czech Republic, Bulgaria, Malta, Slovenia and Sweden were sympathetic to concerns over the practical hurdles to writing Pillar 2 into national statues in such a short period of time.
Sweden, for example, will struggle with the January 2023 deadline due to “our constitutional law-making requirements,” the country’s minister, Mikael Damberg, said while underlining Stockholm’s support for the initiative. “I’m confident that a solution to this problem can be found.”
Estonia agreed in principle to join the OECD reform in October.
Estonia does not currently imposes any corporate income tax on retained and reinvested profits, meaning resident companies and permanent establishments of foreign entities (including branches) see a 0 percent income tax rate on all reinvested and retained profits, along with a 20 percent income tax only for distributed profit.
Estonia, Hungary and Poland resist EU global minimum tax rate
Eestlased Eestis | 19 Jan 2022 | EWR
Eestlased Eestis
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