Corporate Tax

Why Estonia didn’t help the worldwide corporate tax proposal

Tall modern glass buildings along with historical buildings in Tallinn, Estonia.

EyesWideOpen | Getty Images Entertainment | Getty Images

A proposal to set a global minimum corporate tax rate has gained momentum as more than 130 countries support the plan.

But Estonia is holding on, and not because it wants to keep taxes low to attract foreign companies.

The Biden government is pushing for a minimum corporate tax of at least 15%. It aims to prevent multinational companies from avoiding higher taxes by shifting their profits to so-called “tax havens” like Ireland, even if their customers or operations are located elsewhere.

Zoom In Icon Arrows pointing outwards

Estonia’s corporate tax rate is already 20%.

“There are currently no companies in Estonia that actually fall under this new regulation proposal,” Estonian President Kersti Kaljulaid told CNBC’s Rosanna Lockwood at the Asia Tech x Singapore summit on Tuesday.

We do not steal a dollar in taxpayers’ money from any country in the world.

Kersti Kaljulaid

Estonian President

“We discuss theories. We don’t steal a dollar in taxpayer money from any country in the world, ”she said.

She added that Estonia is “extremely transparent” with its tax authority. “We are not a tax haven,” she said.

According to the Organization for Economic Co-operation and Development, the Washington-based think tank Tax Foundation, and consulting firm KPMG, about 15 countries do not levy general corporate taxes. These include island states like Bermuda, Cayman Islands and British Virgin Islands – widely referred to as offshore “tax havens” where large corporations shift their profits.

Further details required

The President said Estonia needs to hear more before it can decide what to do.

“We need to see this technical debate about how exactly this tax will work to see if our system needs to be adjusted or can go on as it is,” she said.

She noted that when the country joined the European Union, there were concerns that its tax system would be incompatible, but later it was found to be “fully compatible”.

“Because we don’t know the formalities, we can’t sign yet,” said Kaljulaid.

The discussions cannot be rushed and it is not yet clear what the final regulation will look like, she added.

“But once the formalities become known and we can negotiate those formalities, I am pretty sure that we will find a way to prove to the world that our tax system does indeed work with this new system worldwide,” she said. “I am very optimistic.”

– CNBC’s Yen Nee Lee contributed to this report.

Related Articles