07/09/21

INTERNATIONAL TAX: Estonia continues talks on adjusting OECD tax deal.

As published on baltictimes.com, Tuesday 7 September, 2021.

TALLINN – Finance Minister Keit Pentus-Rosimannus on Tuesday discussed the international tax reform led by the Organization for Economic Co-operation and Development (OECD), which Estonia wishes to change, with US Secretary of Commerce Gina Raimondo and OECD Secretary-General Mathias Cormann.

The minister emphasized Estonia's goal to reach an agreement that would accommodate the country's investment-friendly corporate income tax system.

"We are searching for a compromise enabling us to preserve our system which was designed to encourage investment and job creation," Pentus-Rosimannus said according to spokespeople for the Ministry of Finance.

"The deal forged at OECD in July is not entirely acceptable to us. It is too vague, with a number of details that could prove harmful to a small open economy such as ours. We do however hope that by October we have resolved the matter in a way catering for Estonia's interests as well," she said.

The OECD-coordinated Inclusive Framework approved the statement on International Tax Reform on July 1 this year. The two-pillar reform comprises so-called digital tax for corporations with group revenue exceeding 20 billion euros, and global minimum tax at the rate of 15 percent for corporations with revenue exceeding 750 million euros.

The new digital tax has Estonia's full support. Although it spans wider than strictly digital revenue, it is a necessary tool to allocate taxing rights to the countries where corporations earn income without being physically present.

The global minimum tax, on the other hand, fails to take into account Estonia's current distribution tax system.

"Our system is not designed to promote tax avoidance. Hence, we expect the OECD to accept a few modifications. The negotiations are ongoing," said the minister.

"Estonia's corporate income tax revenue, as a percentage of GDP, roughly equals that of Germany and France, and surpasses the US. This proves the efficiency of our system," the Estonian minister said at the meeting with the OECD secretary-general.

The OECD plans to finalize the agreement on the reform's technical details in October 2021.