From 2023, an effective minimum tax rate of 15% shall apply to large corporations operating in the EU. The vote of Finance Ministers (ECOFIN) in the Council on 15 March 2022 failed to reach agreement on global minimum tax rates: 4 countries voted against the compromise; however, the Council requires unanimity in matters of tax.
In October 2021, 137 countries at OECD level agreed on common rules on the minimum tax rate for multinational enterprises such as Facebook or Amazon. It consists of two pillars: the first pillar concerns the redistribution of taxing rights regarding consolidated profits between individual countries and shall result in the fairer distribution of state taxing rights. The second pillar provides for a minimum level of taxation of 15%. It would not only reduce the profit shifting by multinational enterprises but also curb excessive tax competition. In response, the Commission had presented a Directive proposal in December 2021 to be able to initially transpose the second pillar of the international agreement into European law.
Despite the agreement of all EU States at OECD level, Sweden, Estonia, Malta and Poland voted against the text, thwarting French efforts to reach unanimous agreement during France’s Council Presidency. French Finance Minister, Bruno Le Maire, was surprised that despite the agreement at OECD level fundamental objections against a minimum tax rate still existed. The Swedish Finance Minister Mikael Damberg reasoned his country’s rejection by saying that given the time pressure, not all technicalities had been resolved yet. Malta and Estonia pointed out that they, as relatively small countries with only a few large corporations, would be confronted with disproportionally high implementation and administrative costs. Hence, Malta demanded to extend the exemption for Member States with fewer than 10 affected companies. Poland, in turn insists that both pillars of the global minimum tax rate have to be decided together before the country could agree. Otherwise, it would not be possible to put sufficient political pressure on third countries to implement the concept. The next ECOFIN meeting will take place on 5 April 2022, to which Bruno Le Maire can get the critics on board.
In principle, AK welcomes the planned minimum tax rate. However, the Commission’s Directive proposal shows little ambition beyond the agreement at OECD level. The EU’s tax policy is subject to unanimity voting rules in the Council, which has resulted in generous exemptions and little ambitious threshold values for companies as each individual Member State has the right to veto. From the AK’s point of view, the low level of aspiration is unfortunate as ambitious tax rates by the EU could have an important exemplary effect. Furthermore, considering the current political and economic crises, the revenue is urgently needed.
AK requests the option for member states to be able to adjust key parameters following a transition period without amending the Directive, such as the level of the minimum tax rate. In addition, a mandatory scientific evaluation regarding economic effects such as its revenue and the possibility of evasion should be implemented. Furthermore, domestic top-up tax has to be abolished as it benefits tax havens which can leverage additional revenues at the expense of normal tax countries. Due to the very low tax rate level of 15% set at OECD level, other tax dossiers should be pursued at EU level. As an example, unitary taxation for big multinationals within the EU (BEFIT) against profit shifting should be introduced or corporate tax transparency could be strengthened.