Europe’s veto threatens to stall global tax reform – POLITICO


Three EU countries have upended the bloc’s efforts to introduce a minimum global corporate tax rate of 15% within 12 months.

Finance ministers from Estonia, Hungary and Poland protested on Tuesday against the planned timetable, which the G20 countries agreed to in October as part of a broader overhaul of corporate tax rules.

Ministers also demanded that the initiative be made conditional on the rollout of a global levy on the world’s 100 largest companies, which is expected to be approved in June and introduced in 2023. Their concern is that US President Joe Biden will not achieve find congressional support. it must implement the same rules, leaving Europe in an economic disadvantage.

The protests in Tallinn, Budapest and Warsaw pose a serious challenge to the EU’s bid to implement the rules in a timely manner, as EU tax deals require unanimous support.

“We believe that the global minimum tax rules can only be implemented if other countries also respect their political commitments”, declared the Hungarian minister, Mihaly Varga, told his EU peers at the meeting of EU finance ministers this month in Brussels.

The tax rate, known as Pillar 2, is part of a global two-pronged deal the Organization for Economic Co-operation and Development (OECD) negotiated last fall to eliminate tax havens and ensure that the world’s multinational corporations, including the tech giants, pay their fair share of tax. The other part of the package, called Pillar 1, would require the biggest companies to pay taxes where they operate, not where they are based.

The European Commission translated Pillar 2 into a European bill at the end of December in the hope of a quick agreement in the coming months. A bill for Pillar 1 is expected to be tabled in July after global policymakers agree and sign a “multilateral convention” at the OECD.

A delay would also tarnish the bloc’s global image as a staunch enforcer of international agreements against tax evasion – a prospect that French Finance Minister Bruno Le Maire found hard to swallow.

“You cannot accept an OECD agreement, and when this agreement is written in a directive, in exactly the same terms, say that the agreement is no longer valid,” said the Frenchman before the meeting, which he will preside. for the next six months under a six-monthly rotating EU Presidency. “There is something incomprehensible there.”

“We took almost five years to find an agreement at the OECD on international taxation,” added Le Maire. “I think the EU must show that it is capable of taking the lead on this subject and of adopting the directive quickly.”

Tallinn, Warsaw and Budapest were the only ones to make open calls to link the two pillars of the OECD to protect themselves from the United States, because the two initiatives are legally independent of each other. But the Czech Republic, Bulgaria, Malta, Slovenia and Sweden were sensitive to concerns about the practical obstacles to enshrining Pillar 2 in national statutes in such a short time.

Sweden, for example, will struggle to meet the January 2023 deadline due to “our constitutional requirements for legislation”, the country’s minister, Mikael Damberg, said while emphasizing Stockholm’s support for the initiative. “I am convinced that a solution to this problem can be found.”

Giorgio Leali contributed reporting.

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