INTERNATIONAL TAX: EU puts tech tax on hold, amid US pressure - but Ireland pushes back.

As published on cityam.com, Monday 12 July, 2021.

The EU has decided to delay plans for a new digital services tax, under pressure from the US administration and after the G20 agreed to a global overhaul of corporation tax – but EU member Ireland has restated its criticisms of the wider reform.

The European Commission had planned to outline its proposed tech tax — which has proved controversial — later this month.

But a spokesperson today said: “We have decided to put on hold our work on our new digital levy as a new EU own resource.”

It comes after G20 finance ministers agreed to a new framework for global taxation brokered by the OECD aimed at cracking down on tax avoidance by major multinational companies.

The plans will see the implementation of a new global minimum corporate tax rate of 15 per cent, while the second part of the deal is designed to force firms to pay tax in the countries where they sell their products or services.

The issue of tax reform has been a major source of friction between the US and Europe in recent months, with Washington arguing that the proposed new digital levy would unfairly target American companies.

The EU’s decision to shelve its plans will be welcomed by the US and could help to push the global agreement through.

But in order for the reform to be successful, all of the EU member states must also approve tax reforms, which includes the envisioned global deal.

Ireland, alongside Hungary and Estonia are the three EU countries which have held out against the global deal.

Ireland said it cannot support the floor of 15 per cent for the global tax rate which is aimed at stopping multinationals seeking out the lowest tax rate, according to Reuters.

The global tax rate would force Dublin to raise its 12.5 per cent rate, which has been key in attracting companies to build their headquarters in Ireland.

US Treasury secretary Janet Yellen reiterated on Monday her call on all 27 EU countries to join the global deal.

“We need to put an end to corporations shifting capital income to low tax jurisdictions, and to accounting gimmicks that allow them to avoid paying their fair share,” she said in a statement, it Is widely reported.

This weekend she also warned that some of the reforms may not be ready until spring next year.

Yellen said the OECD’s re-allocation of taxing rights was on a “slightly slower track” than a global minimum corporate tax rate of 15 per cent.