According to media reports, Ireland has been able to push through a far-reaching concession in the negotiations on the global corporate tax reform: The wording of the planned global minimum tax for companies is to be weakened at a crucial point. Until now, the plans of the OECD/G20 Inclusive Framework on BEPS had referred to an effective minimum tax rate of “at least 15 per cent”. This is to apply to large companies with a consolidated group turnover of more than €750 million. Ireland was apparently able to have “at least” deleted. This would remove the possibility for other countries to set a higher minimum tax rate. US President Biden had originally proposed an effective minimum tax rate of 21%; the wording “at least 15 percent” was already a concession to countries with low taxes.
The negotiations, which have spanned several years, are almost over: This Friday, 8 October, the crucial negotiations under the OECD/G20 Inclusive Framework will take place. On 13-14 October, G20 finance ministers and central bank governors will meet to finalise negotiations on the global corporate tax reform. The final agreement is expected at the end of October.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“While the Pandora Papers are unfolding, the EU is not only weakening its list of tax havens, it is also weakening the international tax consensus against the will of its US partners. Capping the minimum tax at 15 per cent would be a major setback for this important project for tax justice. An effective minimum tax of 15% is not enough to end the disastrous tax competition which is ongoing between countries. It would be a massive weakening of the proposed global corporate tax reform, which was supposed to leave the door open for countries to champion tax cooperation by introducing a higher rate.
The members of the OECD Inclusive Framework must stand together to keep the level of ambition high. EU Member States must defend the option to introduce a higher minimum tax rate. The adherence to the unanimity principle in tax matters in the EU gives tax havens like Ireland disproportionate influence. Yet individual member states can already lead the way with an ambitious minimum tax and turn the tables on the low tax countries. This is clearly shown by an expert opinion I commissioned from the renowned tax professor Joachim Englisch.
A minimum tax of 15 percent maximum during the biggest tax leak ever would be a political and moral declaration of bankruptcy. The Pandora Papers are the latest evidence of the global tax avoidance crisis. Tax avoidance by billionaires and large corporations are two sides of the same coin. We need a strong commitment to tax cooperation. In the face of the brazenness with which billionaires and big business refuse to contribute to the public purse, we need decisive European action.”
The “OECD/G20 Inclusive Framework on BEPS” includes 140 member jurisdictions. BEPS stands for Base erosion and profit shifting, it is the umbrella term for the strategies used by multinational companies to exploit loopholes and inconsistencies in tax rules to avoid paying taxes. The OECD Inclusive Framework is working to implement 15 measures to curb the global tax avoidance crisis. Ireland, Hungary and Estonia refused to endorse an initial decision by the OECD Inclusive Framework on global tax reform on 1 July. Cyprus is not even a member of the OECD Inclusive Framework and has already announced a veto against the implementation of the OECD agreement in the EU.
A legal study by the renowned international tax professor Dr. Joachim English shows that the G20/OECD deal can be implemented in Europe without unanimity of member states. I commissioned the study. https://sven-giegold.de/steuerrechtliches-gutachten-prof-englisch-legal-study/
With a minimum tax rate of 21%, the EU would raise about €100 billion extra in 2021. A change from 21% to 15% would halve the additional tax revenue in the EU. Based on a study by the EU Tax Observatory on the revenues from an effective minimum corporate tax rate of 25, 21 or 15 per cent: https://www.taxobservatory.eu/wp-content/uploads/2021/06/EUTO2021-1.pdf