The EU had all but completed plans to introduce a global minimum corporate tax rate of 15%. The plan was to implement the global tax within 12 months. Now, three countries have thrown a wrench into the whole thing. Estonia, Poland, and Hungary’s finance ministers protested the move on Tuesday.
They don’t seem too happy about the timetable either, which the G20 countries agreed to in October as part of a much bigger effort to restructure corporate tax rules.
The ministers demanded that the initiative be dependent on the rollout of a global levy on the world’s 100 biggest countries.
What could be the reasons?
The ministers do not have faith in Biden’s ability to get congressional support, which he will need if he is to implement the same rules. The bloc would fall in line easily, seeing as they all stand to benefit from this law. However, if the US does not do the same, the EU could be at a disadvantage.
It is like saying ‘we only want to tax our obscenely wealthy people, only if the US does it too, which we aren’t sure Biden can do.’
The protests will impact the EU’s ability to implement the tax law in the proposed timeframe because tax agreements only pass if the vote is unanimous.
The tax rate is known as Pillar 2 and is part of a double front plan brokered last fall by the Organization for Economic Cooperation and Development (OECD) to get rid of tax havens and ensure the planet’s multinational firms, including tech giants, pay their fair share in tax.
Pillar 1 entails a requirement that all the biggest firms pay tax where they operate and not where they are based. Though Pillar 2’s bill showed up in late December, the countries may have to wait longer to agree on how to rollout the tax.
A bill for Pillar 1 should be here by July after global policymakers sign a multilateral convention at the OECD.