Negotiations on global minimum taxation at OECD level are still ongoing. But the Commission is already saddling on it. It calls on the EU states to set their corporate tax rates above the rates currently being discussed.
SSince the inauguration of American President Joe Biden, what was considered an illusion for many years could become a reality: a global, effective minimum taxation of global corporations based on uniform rules. The negotiations currently under way in the industrial countries organization OECD are well advanced, the result is a uniform minimum tax rate, combined with a redistribution of taxation rights between producing countries and “market countries”, ie those countries in which the products are sold. The redistribution is aimed at digital corporations that are particularly suspected of saving taxes internationally through internal profit shifts and offsetting. At the beginning of July, the G20 finance ministers want to reach a political agreement in Venice. It will be years before the individual regulations are worked out.
The EU Commission is now rushing forward with the statement that global agreement will not be enough for the EU. In a communication published on Tuesday, the EU authority calls on the member states to set their corporate tax rates above the rates currently being discussed in the OECD, if possible. In addition, it wants to enact a new legal framework for the EU based on the global rules. That is better than if the member states directly transformed the OECD framework into national law, said one official.
The “advances” that should be striven for in the EU include higher rates than the global rates, the paper says. Vice-President Valdis Dombrovskis, in charge of the economy, said on Tuesday that EU taxation must “keep pace with our changing priorities”. Taxes should support the goal of a “fairer and more sustainable economy”.
Unrealistically high suggestion
What “higher rates” could actually mean in the EU depends on the minimum rate that the OECD countries will agree on. The rate of 21 percent, which the US Treasury Secretary Janet Yellen recently brought into play and which is supported by Germany and France, is considered unrealistically high. In Ireland the rate is currently 12.5 percent, in Germany it is 15 percent. The EU also has no competences on the question of national rates. However, the Commission wants to set a minimum rate. A new framework for corporate taxation in the EU is possible, although the member states would have to adopt this unanimously, the authority said. “Just as there is consensus in the OECD, we see it in the EU too,” said one official.
With the communication, the EU Commission is preparing some further legislative proposals, some of which are related to the hoped-for global agreement, and some of which go beyond it. The Commission wants to make the OECD idea of redistributing taxation rights between states and thus preventing the flight of corporations to low-tax countries binding for EU states and thus preventing member states that do not belong to the OECD – such as Malta and Cyprus – who undermined the scheme.
“Digital delivery” proposals in July
While a special digital tax is globally off the table, the EU Commission is sticking to the project under pressure from the member states. Concrete proposals for the “digital levy” are planned for July. This should be raised on a broad tax base with very low rates, it said in the commission. Also one will continue to proceed against Apple, Amazon & Co. with the means of the state aid law. However, the authorities withdraw their original proposal for a digital tax.
The proposals for a common corporate tax base, which have long been on hold, are also being withdrawn. However, this should reappear in a new legal framework for corporate taxation, which the Commission intends to propose in 2023. This new initiative should also ensure that “differences between national tax systems do not limit the ability of member states to finance their spending requests”. How far the Commission wants to restrict tax competition, it still left open.
First of all, the EU authority wants to get some smaller initiatives off the ground. For example, in autumn she wants to propose that large corporations should publish their effective tax burden according to comprehensible standards. A second proposal is to limit the abuse of letterbox companies in tax havens. In addition, the Commission wants to make it easier for companies to offset losses and offset the costs of capital increases. The member states would have to agree to everything unanimously.