One more step towards global tax reform. The leaders of the 27 member countries of the EU approved on Thursday the transposition into European law of the minimum tax of 15% on the profits of multinationals, approved last year by nearly 140 countries under the aegis of the OECD.
The purpose of this agreement is to end the tax advantages enjoyed by certain multinationals, including the digital giants, by locating in countries where the corporate tax rate is very low, or even zero.
Currently, each Member State is free to establish the tax rate of its choice for companies established on its territory. The entry into force of the measure in Europe is scheduled for December 31, 2023.
The move comes a year and a half after a historic agreement signed by G7 finance ministers to establish a global corporate tax rate of “at least 15%”.
The European agreement was made possible by the lifting of the Hungarian and Polish blockages, announced the European Commissioner for the Economy Paolo Gentiloni. The unanimity of the Twenty-Seven was indeed necessary to validate the draft directive prepared by the Commission.
“A major step forward”
“It was a long journey, the Commission never gave up. Proud to deliver a message of fairness to our fellow citizens,” he wrote in a tweet.
Emmanuel Macron, at the forefront of this issue for several years, hailed “a major step forward for all those who hold as we hold to tax justice”.
“We are implementing one of my dearest projects in Europe: minimum taxation of companies worldwide,” also welcomed German Chancellor Olaf Scholz.
The global minimum tax is only one part (known as pillar 2) of the OECD agreement. The first pillar, which provides for the taxation of companies where they make their profits to put an end to certain practices of tax evasion, targets in particular the digital giants. It requires an international agreement which is not yet finalized.