Corporate Tax

MEPs say the EU ought to do it alone with the minimal corporate tax charge

MEPs called for a postponement of outdated international tax rules, including setting a minimum effective corporate tax rate, and that the EU should do this alone if global negotiations fail.

The calls are made in the form of a resolution adopted on Tuesday by Members of the Economic and Monetary Committee.

In March 2018, the European Commission presented the legislative package on the fair taxation of the digital economy. This included two proposals – an intermediate tax (digital services) and a long-term tax (significant digital presence) – supported by the European Parliament in its advisory role but not that of the Council as it failed to reach a political agreement.

As a result, some countries such as France, Italy and Spain introduced a national tax similar to the provisional tax on digital services. others, like the Czech Republic, are still thinking about one thing. Almost all countries that have introduced such a tax insist that it is an interim solution until a global solution is found in the area of ​​direct taxes.

The German rapporteur Andreas Schwab (EPP) reacted as follows after the vote: “We have asked the US to accept that a common system is required, for which no“ Safe Harbor ”rules apply. We must fight together for a solution at G20 / OECD level. If a global solution is not possible, the EU should take a step now. It is time for the legislator to formulate a clear and complete digital tax policy in the EU: EU minimum taxation, no market distortions due to national toolboxes and tax security for digital companies that benefit from harmonized and fair digital taxation. ”

Martin Hlaváček (Renew) said: “We want to ensure our citizens that digital companies doing big business in Europe, regardless of their physical presence, are paying their fair share of our public finances. In the absence of an OECD agreement with our external partners by July 2021, the European Parliament will ensure that the Commission immediately comes up with our own European solution. ”

MPs said current international tax rules date back to the early 20th century, with an emphasis on physical presence and next to neglecting the digitization of business. The result was that taxes paid in a jurisdiction no longer reflect the value and profit created there, resulting in base erosion and profit shifting (BEPS).

The rules have also resulted in traditional businesses being taxed, on average, almost three times as much as digital businesses.

In order to resolve the existing discrepancies and to increase fairness, the MEPs make a number of proposals. They are calling for an effective minimum tax rate to be set at a fair and sufficient level to prevent profit shifting and prevent harmful tax competition.

They also call for a reallocation of tax rights in order to take into account that the interaction of companies with users and consumers as a result of digitization adds significantly to the creation of value in highly digitized business models.

Finally, MEPs insist that the EU should develop its own substitute position, which would prevail if the global negotiations failed to produce results by the end of the year. In a first step, this replacement item would include a tax on digital services.

The resolution will now be put to the vote in the European plenary, which is expected at the end of April.

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