Brussels unveils new tax agenda ahead of crucial G20 meeting in July Access to the comments COMMENTS
By Euronews • 18/05/2021
EU Commissioners Dombrovskis and Gentiloni presented the new tax agenda.
EU Commissioners Dombrovskis and Gentiloni presented the new tax agenda. - Copyright Christophe Licoppe/ EU/Christophe Licoppe
The European Commission has unveiled a new tax agenda that aims to ensure EU countries are able to collect the necessary revenues to finance the post-coronavirus recovery as well as the twin green and digital transitions.
The presentation comes just weeks before a crucial meeting of G20 finance ministers in Venice where world powers will seek to reach a long-delayed agreement to reform the international corporate tax system, which many considered obsolete due to the transformations and challenges arising from the digital economy.
Both the EU's new tax agenda and the G20 negotiations are designed around the two-pillar framework of the Organisation for Economic Co-operation and Development (OECD).
The first OECD pillar is centred on the partial re-allocation of taxing rights to ensure that taxing profits is no longer exclusively determined by a company's physical presence. The second one is focused on establishing a minimum effective tax rate for the profits obtained by large multinationals, regardless of the country in which they are based.
Discussions inside the OECD have been going on for years but the devastating impact of the coronavirus pandemic and the rise in teleworking have created momentum for a successful conclusion.
Advanced economies have been pumping unprecedented levels of fiscal support that have resulted in a pronounced hike in public debt, which governments must gradually repaid. Increasing the tax rate for large corporations, many of which have seen their profits skyrocket during the pandemic, has emerged as one of the easiest and most immediate solutions to obtain revenues.
This sense of urgency has led US President Joe Biden to throw his support behind the global efforts to find a consensus around corporate tax, a process that previous American administrations have hindered. Biden is in need of funds to finance his ambitious $2.3 trillion infrastructure bill.
"We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom," said US Secretary of Treasury Janet Yellen in early April. "Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth, and prosperity."
Brussels has moved quickly to embrace America's U-turn and move ahead with its economic plans.
"It's time to rethink taxation in Europe," said Paolo Gentiloni, EU Commissioner for economy, on Wednesday afternoon while presenting the new tax agenda.
"The renewal of the transatlantic relationship offers an opportunity to make decisive progress towards a global tax reform. We must work to seize that opportunity, while ensuring that an international agreement protects Europe's key interests."
Gentiloni added that it might be possible to reach an "agreement in principle" when financial ministers from the G20 group meet in Venice in mid-July, but warned that the implementation and the details will take longer time to develop due to the complexity of the issue. The commissioner said that any agreement would be a "great success" compared to the situation half a year ago.