EU will propose minimum tax legislation if G20 reaches deal, commissioner says

By Doug Connolly, MNE Tax

The European Commission will propose legislation to implement an international agreement on a global minimum corporate tax to ensure its uniform application within the EU, according to June 14 comments from European Commissioner for Economy Paolo Gentiloni.

Speaking virtually at an event hosted by the Institute of International and European Affairs, an Irish think tank, Gentiloni added that a minimum tax agreement would also require amending existing EU directives, including the anti-tax avoidance directive.

Following the recent G7 agreement to seek a global minimum tax of at least 15%, attention will turn to the upcoming G20 finance minsters’ meeting in Venice on July 9–10. The negotiations on international tax changes are formally being held at the G20 level, with support of the OECD and in consultation with 139 nations that make up the Inclusive Framework.

The EU will have an opportunity to contribute to the discussions at the G20 level next month, and Gentiloni stated that the Commission is aware that its role is to “represent the common interest of all” 27 EU member states, large and small.

Gentiloni further acknowledged that some EU member states, including Ireland, are “wary” of the changes. However, he suggested that a small open country like Ireland has “a lot to gain” from new international tax rules.

Successful negotiations at the G20 level “will require compromises,” Gentiloni said.

EU members states lose EUR 35–70 billion (USD 42–84 billion) to corporate tax avoidance each year, according to Gentiloni. “Loopholes and mismatches between the tax systems of the member states can leave open opportunities for aggressive tax planning, reducing the tax burden of some businesses at the expense of other taxpayers.”

Regarding the “pillar one” international tax talks on reallocating a portion of taxing rights with respect to multinational profits to market jurisdictions, Gentiloni stated that such an agreement would need to be implemented through a multilateral convention. However, the European Commission would also consider proposing a directive to ensure its uniform implementation in the EU.

Gentiloni emphasized the importance of a comprehensive approach to tax reform and tied the global tax talks to the Commission’s new plan for a common corporate tax base in the EU. He said that the new common corporate tax base plan “will build on the global discussions.”

Europe must examine how its tax law should evolve to safeguard tax revenues and ensure fairness, Gentiloni said. He added that this cannot be done “in a piecemeal way” nor “at the EU level alone.”