Corporate Tax

EU pauses on US digital levy to concentrate on world corporate tax plan

Issued on: 07.12.2021 – 16:46

The European Union agreed to postpone a corporate tax plan for the bloc under pressure from the US government and allow for a broader global tax deal, but EU member Ireland reiterated its criticism of the broader reform.

The world’s 20 largest economies on Saturday approved a plan for a global corporate tax revision that would introduce a minimum tax rate and change the way big companies like Amazon and Google are taxed based in part on where they sell their products and sell services, rather than the location of their headquarters.

The reform, if completed in October, would require parliamentary approval in the 130+ countries that support it, including the US Congress, where it could face Republican opposition. All EU member states must also agree to tax reforms – including the desired global agreement.

To remove a potential hurdle for the global deal, the EU bowed to pressure from the US, saying on Monday it would postpone its own plan for a separate levy on online sales, which the US government feared will lead to more criticism could global tax reform in the US Congress. “We have decided to stop our work on our new digital levy,” said the EU Commission spokesman, Daniel Ferrie, at a press conference in Brussels on Monday. The block will reassess the situation in the fall. The tax proposal was planned for the end of July.

The announcement coincided with US Treasury Secretary Janet Yellen’s visit to Brussels and followed repeated pressure from her during a G20 summit over the weekend and before.

EU Economic Commissioner Paolo Gentiloni told journalists that postponing the block plan would make it easier to focus on reaching the “last mile” of the global deal.

However, there remain some reservations about the global deal, including three EU countries – Ireland, Hungary and Estonia.

Ireland has stated that it cannot support the 15% lower limit for the global tax rate, which should discourage multinational corporations from looking for the lowest tax rate, but would force Dublin to raise its 12.5% ​​rate, which helped has to convince several companies to make the island their EU headquarters.

Yellen on Monday reiterated its call to all 27 EU countries to join the global agreement.

“We need to put an end to corporate shifts of capital income to low-tax countries and accounting gimmicks that allow them not to pay their fair share,” she said in a statement.

But Irish Finance Minister Paschal Donohoe did not seem to have changed his criticism of the reform. After meeting with Yellen, his spokesman said he had Ireland’s support for changing the taxation of multinationals but reiterating his opposition to the 15% minimum.

Donohoe said, however, that Ireland is committed to the process and is ready to work with the Organization for Economic Co-operation and Development (OECD), which is coordinating talks on global reform, in the coming weeks.


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