The European Union has taken the first step to set a minimum corporate tax of 15% for multinational companies, which is consistent with the global agreement reached earlier this year, as the White House encountered obstacles in its efforts to translate the agreement into law.
When announcing the launch of a new EU tax directive, Economic Affairs Commissioner Paul Gentiloni said that despite concerns in some European capitals, he expects 27 member states to agree on specific details within six months.
The draft directive sets an effective corporate tax rate of 15% for multinational companies and other large companies with a turnover of more than 750 million euros, and an agreement signed by 136 countries and jurisdictions was promulgated earlier this year.
US President Joe Biden pushed the Organization for Economic Cooperation and Development (OECD) and other local members to reach this agreement, but faced difficulties in enacting domestic legislation.Tax rate changes have been tied to his Rebuild better actions, Including funding for social security and response to climate emergencies.
In recent months, Hungary and Estonia have raised concerns about minimum interest rates. However, former Italian Prime Minister Gentiloni said he believes that the directive will obtain the necessary EU unanimous agreement and the White House will overcome its obstacles.
“I don’t think the ongoing discussions in the United States are focused on the issue of corporate tax. Our constant contact with the government shows that there is absolutely an opportunity to continue legislation,” he said.
Hungary’s corporate tax rate is 9% and there is a disagreement with the European Commission because it failed to sign a multi-billion-euro recovery fund plan. The Estonian government is concerned about the impact of the minimum tax rate on its attractiveness for foreign direct investment.
Gentiloni said: “We have not abolished tax competition. In different countries, we still have very different levels of corporate taxation. What we are introducing is a ceiling, a restriction, and competition at the bottom.”
The draft directive includes some exemptions. The company will be able to exclude income equivalent to 5% of the value of tangible assets and 5% of total wages when calculating the tax payable. For the 10-year transition period, the exclusions will be higher, starting with 8% of tangible assets and 10% of wages.
Tove Maria Ryding of the European Debt and Development Network, which represents 53 NGOs working on this issue, said: “We are in a global crisis, but unfortunately, neither the EU nor the OECD have the courage to propose a corporate tax. A truly ambitious reform of the rules could have mobilized billions of dollars to fill the budget gap.
“Today’s EU tax scheme is a Christmas gift for all multinational companies that can continue to pay extremely low taxes.”
