By Doug Connolly, MNE Tax
The European Commission will propose legislation to implement an international agreement on a global minimum corporate tax in order to ensure its uniform application within the EU, according to the opinion of EU Economic Commissioner Paolo Gentiloni on June 14th.
In a virtual speech at an event organized by the Irish think tank Institute of International and European Affairs, Gentiloni added that a minimum tax treaty would also require changes to existing EU directives, including the Anti-Tax Avoidance Directive.
Following the recent G7 agreement to aim for a minimum global tax of at least 15%, attention will be drawn to the upcoming meeting of G20 finance ministers in Venice on July 9-10. Negotiations on international tax changes are formally conducted at the G20 level, with the support of the OECD and in consultation with the 139 nations that make up the Inclusive Framework.
The EU will have the opportunity to contribute to the G20 discussions next month and Gentiloni stated that the Commission is aware of its task to represent “the common interest of all” 27 EU Member States, large and small.
Gentiloni also acknowledged that some EU Member States, including Ireland, are "cautious" about the changes. However, he suggested that a small, open country like Ireland had "a lot to gain" from new international tax rules.
Successful negotiations at G20 level "require compromises," said Gentiloni.
According to Gentiloni, EU member states lose 35 to 70 billion euros (42 to 84 billion US dollars) each year on corporate tax avoidance. "Loopholes and discrepancies between Member States' tax systems can open up opportunities for aggressive tax planning and reduce the tax burden of some companies at the expense of other taxpayers."
Regarding the international tax talks of the "first pillar" on the reallocation of part of the taxation rights in relation to multinational profits to market jurisdictions, Gentiloni stated that such an agreement must be implemented through a multilateral agreement. However, the European Commission would also consider a proposal for a directive to ensure uniform implementation in the EU.
Gentiloni stressed the importance of a comprehensive approach to tax reform and tied global tax talks to the Commission's new plan for a common corporate tax base in the EU. He said the new common corporate tax base plan will "build on global discussions."
Europe must examine how its tax law should develop in order to secure tax revenues and ensure fairness, said Gentiloni. He added that this could not be done either “piecemeal” or “at EU level alone”.
Doug Connolly is the Legal Editor, International Tax, at MNE Tax. He has more than 10 years of experience in tax law developments and previously worked for both a Big Four law firm and a leading legal publisher. He holds a law degree from the American University's Washington College of Law.
