EU to cooperate with US on global taxation deal

Commission says agreement would ‘transfer’ into law

European commissioner for economy Paolo Gentiloni.

European commissioner for economy Paolo Gentiloni.

 

The European Union will cooperate with the United States on finding a global deal on taxation after Washington proposed a global 21 per cent minimum corporate tax rate, and would “transfer” any global agreement into EU law, the European Commission’s Paolo Gentiloni said on Friday.

Speaking in a joint press conference with Minister for Finance Paschal Donohoe following a meeting of the Eurogroup, the economy commissioner described a new momentum towards a global deal on the taxation of digital services and multinationals since US President Joe Biden took office.

Proposal

“We understand the American proposal is very ambitious for... the minimum taxation,” Mr Gentiloni told journalists. “Of course, we will cooperate to reach the global agreement, and then to transfer the global agreement in the legal European framework.”

Compared to an EU-only deal, a global agreement “will be much better not only for members states but also for the business community and also for consumers”, he added.

“If you want my preference, my preference goes to a global solution in taxation, always,” Mr Gentiloni said. “My second best is European solutions, and the worst case is to have, as we are having on digital services, the risk of proliferation of national taxation.”

Asked the same question, Minister for Finance said he had “nothing to add” to the commissioner’s comments.

The European Commission has previously expressed support for the call by US treasury secretary Janet Yellen for a common global minimum taxation rate to redress what she has described as a “thirty-year race to the bottom on corporate tax rates”.

However, the commission has not backed the proposed tax rate of 21 per cent. The rate is likely to prove contentious among some member states with competitive tax rates, particularly Ireland, which defends its 12.5 per cent tax rate as essential to compensate the advantages of scale, resources and location enjoyed by larger countries.

Levy

The EU has vowed to push ahead with its own digital levy if a global agreement is not reached, with the commission set to lay out proposals in June.

Several EU countries are impatient to bring in the regulation after Ireland and and an alliance of other small member states blocked proposals for a tech tax in 2018, in favour of reaching an OECD deal. France has pushed ahead with its own national digital taxation law in the absence of an EU agreement.

Work has long been underway at the OECD to agree a two-pillar global taxation scheme originally aimed at tech giants like Google, Amazon, Facebook or Apple, to allow for companies to be taxed where they make their profits, regardless of their physical presence.

The global minimum tax rate, which would apply to all companies, is a second aspect of the OECD discussions, which were stalled under the administration of former US President Donald Trump.