Poland blocks EU agreement on 15% minimum corporate tax rate

Warsaw alone vetoes directive at meeting of finanace ministers

Poland was urged to look to Ireland as an example as it blocked the European Union from transposing an Organisation for Economic Co-operation and Development (OECD) deal for a 15 per cent minimum tax on large multinationals into EU law on Tuesday.

Warsaw alone vetoed the directive at a meeting of finance ministers in Luxembourg, delivering a blow to international consensus to overhaul taxation rules that could delay its implementation.

French finance minister Bruno Le Maire described the root of Poland’s opposition to the deal as a “mystery”, and said there must be “some other reason” behind it because all of Warsaw’s objections had been accounted for in a compromise text worked out between the 27 EU members.

Ireland

In remarks to journalists, he urged Warsaw to take inspiration from Ireland, which dropped years of fierce opposition to any such move to back the deal.

“Three or four years ago, it would have seemed absolutely impossible that Ireland would accept this minimum tax because their entire economic model would have been called into question,” Mr Le Maire said in response to a question by The Irish Times.

“But I remember meeting in Dublin with the president with the prime minister with the Irish ministers, and then at the end of the day, Ireland said yes. Yes, they said, this is fair. It’s more effective. We have to do it,” he added.

“The willingness to compromise on the part of the Irish government helped us to get to where we are,” Mr Le Maire said. “I wish for Poland to look to that Irish example.”

Polish revenue chief Magdalena Rzeczkowska announced her country would not back the deal in a publicly-broadcast session of the 27 EU ministers.

Poland was left as the only member state to oppose the deal, which required consensus to pass, after Estonia accepted a tweak to the text to allay their concerns about the burden of implementation on their tax authorities.

The text in front of the finance ministers “cannot be supported by Poland”, Ms Rzeczkowska told the session.

She laid out her country’s view that the 15 per cent minimum tax rate, known as Pillar Two, should not be implemented without certainty on international implementation of Pillar One plans, which determine where digital revenues should be taxed.

Burden

“We should be mindful of the inadequacy of placing additional burden on European businesses under Pillar Two, without ensuring the digital giants are fully taxed under Pillar One,” she said.

There were risks that it was “not guaranteed” that Pillar One would come into force, she said, questioning whether all countries would implement it.

“Lack of participation of some jurisdictions in Pillar One undermines the balance and objective behind the whole two-pillar solution,” she said.

A joint EU statement promising to implement both pillars was offered as reassurance, but this was not accepted by Poland as a solution. Officials have said that the two pillars cannot be legally linked because Pillar One is an international treaty, while Pillar Two is an EU directive.

Ireland spoke in favour of the agreement, with Minister for Finance Paschal Donohoe praising “all the hard work that has gone on to get to this point” and welcoming a planned change to the date of entry into force to the end of 2023.

Increasing equity between taxation rates in the EU is a long-time political objective of France and Paris had been determined to get an agreement on the minimum taxation rate ahead of the upcoming presidential election.

Some member states had reacted with surprise to the emergence of Poland’s concerns about the agreement, and questioned whether Warsaw’s opposition was intended as a way to get concessions in other areas.

Naomi O’Leary

Naomi O'Leary

Naomi O’Leary is Europe Correspondent of The Irish Times