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Spain has promised that it will work with other European countries to advance plans to introduce a minimum corporate tax of 15 percent as part of a groundbreaking global pact led by the OECD, even if measures fail in the US.
In an interview with the Financial Times, Budget Minister María Jesús Montero said it was unacceptable that some corporations in Spain only pay 6 percent corporate tax while smaller companies pay 19 percent on regressive fiscal engineering “.
As one of the first EU countries to introduce a “digital tax” on companies like Google, Spain has strengthened its status as a forerunner for stricter EU tax rules. The global minimum corporate tax pact is also entering a crucial phase.
Regarding the deal in July by more than 130 countries that agreed to the principle of a minimum global tax of 15 percent, Montero said, “It is unstoppable. . . Regardless of what is in the [US] Congress – which will hopefully go in the right direction – this debate has now been settled: Europe cannot withdraw from what we have all agreed in the OECD. “
US President Joe Biden is fighting to bail out his $ 3.5 trillion spending bill – a cornerstone of his legislative program, which includes proposals for a new minimum effective corporate tax of 15 percent and corporate headline tax increases. Biden lacks the support of two key senators for spending legislation.
Another potential sticking point in Spain’s position is that while any country can unilaterally introduce the global minimum tax, the EU as a bloc requires the unanimity of its 27 members. However, Estonia, Hungary, Malta and especially Ireland have not yet approved the agreement.
However, since most of the multinationals that pay low tax rates in Ireland are US corporations, Ireland would automatically lose its tax advantage if the US Congress passed the law.
In Spain, Montero is in the final phase of negotiations on the government’s budget proposals for 2022. The radical left group Podemos, the junior partner of the socialist-led coalition, is campaigning for the corporate tax rate of 15 percent to be included in the country’s budget.
Montero, a socialist, said the tax measure would be included in these proposals, which must be endorsed by parliament by the end of the year – or it would follow a report by a committee of experts on tax reform next February.
However, she cautioned that the international consensus could still be tested by “differences in the fine print”, arguing that the numbers could be “radically different” depending on whether the 15 percent is on taxable income or reported Corporate profits would be charged, and when some sectors are exempt.
Other areas that have yet to be finalized in the tax treaty are the dispute settlement mechanism and specific exemptions for countries that, although not tax havens, attract companies through various tax incentives, often for production equipment and machinery.
Montero said she was confident that Spain’s minority government will win parliamentary support for the budget, as it did for the first time last year. “It is important that the recovery is fair and reaches all of our citizens,” she said.
The budget forecasts that Spain’s budget deficit, which is expected to be 8.4 percent in 2021, will fall to 5 percent next year and will continue to fall to just over 3 percent by 2024. However, critics of the left government are skeptical that it will give up the high spending habits of the pandemic era.