18 January 2022

POLITICO: Europe’s veto threatens to stall global tax reform

Estonia, Hungary and Poland are unhappy with plans to introduce a minimum global corporate tax rate of 15 percent by January 2023...Their finance ministers protested on Tuesday the planned timetable, which G20 countries agreed to in October as part of a wider overhaul of corporate tax rules.

Three EU countries have thrown the bloc’s efforts to introduce a global minimum corporate tax rate of 15 percent within 12 months into disarray.

The ministers also demanded the initiative be contingent on the rollout of a global levy on the world’s 100 biggest companies, due to be rubber-stamped in June and introduced in 2023. Their concern is that U.S. President Joe Biden will fail to find the Congressional support he needs to implement the same rules, leaving Europe at an economic disadvantage.

The protests from Tallinn, Budapest and Warsaw pose a serious challenge to the EU’s bid to implement the rules in a timely fashion, as EU tax agreements require unanimous support.

“We believe that the global minimum tax rules can only be implemented if other countries also live up to their political commitments,” Hungary’s minister, Mihály Varga, told his EU peers at this month’s meeting of EU finance ministers in Brussels.

The tax rate, known as Pillar 2, is part of a two-pronged global agreement that the Organization for Economic Cooperation and Development (OECD) brokered last fall to obliterate tax havens and ensure that the world’s multinational firms — including tech giants — pay their fair share in tax. The other part of the package, called Pillar 1, would require that the biggest firms pay tax on where they operate, not where they’re based.

The European Commission translated Pillar 2 into an EU bill in late December in the hope of a swift agreement within the coming months. A bill for Pillar 1 is set to come in July after global policymakers have agreed and signed a “multilateral convention” at the OECD.

A delay would also tarnish the bloc’s global image as a faithful enforcer of international agreements against tax dodging — a prospect that French Finance Minister Bruno Le Maire struggled to swallow.

“You can’t accept an accord from the OECD, and when that accord is written into a directive, exactly with the same terms, say the accord is not valid anymore,” the Frenchman said ahead of the meeting, which he’ll chair for the next six months as part of a rotating six-month EU presidency. “There’s something incomprehensible there.”...

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