15/03/22

INTERNATIONAL TAX: EU delays deal on 15pc corporate tax until April.

As published on independent.ie, Tuesday 15 March, 2022.

EU finance ministers have delayed a new 15pc corporate tax deal while they work out the kinks.

The bloc is negotiating a law based on a global accord reached by 137 countries last year at the Organisation for Economic Cooperation and Development (OECD).

Ireland supports the deal, but opposition from Poland, Sweden, Malta, and Estonia means EU officials will have to redraft the text ahead of a meeting next month.

Issues with the entry date, temporary opt-outs for smaller countries and links with a parallel deal to shift taxing rights for the world’s 100 largest firms held up an agreement at an EU finance ministers’ meeting in Brussels on Tuesday.

Most EU countries gave their full backing to a French compromise text that delays the application of the rules until the 2024 budget round and allows a five-year exemption for countries with fewer than 10 major multinationals.

A parallel deal on reallocating taxing rights is still being negotiated at the OECD, with the EU due to table legislation in July. The Department of Finance estimates that part of the agreement could wipe out €2bn a year in tax revenues.

Finance Minister Paschal Donohoe said the text was a “reasonable and good compromise” and was in line with the OECD text.

Germany, Spain, Italy and The Netherlands gave the text their full backing, while Hungary and Cyprus reversed their previous opposition.

French finance minister Bruno Le Maire, who chaired Tuesday’s meeting, said he was “convinced” there would be a deal in April.

EU economy commissioner Paolo Gentiloni said a deal was “of extraordinary importance” to boost public revenues, particularly as the economy deals with the shock of the Russia-Ukraine war.

The EU also wants to use some of the revenues from the extra corporate tax to fill its own budget.

The deal targets require firms with a combined group turnover of at least €750m a year to pay at least a 15pc tax rate in each country in which they operate or face top-up taxes in other countries.

The Department of Finance estimates it will apply to 1,600 companies here, 56 of them Irish.

An EU deal is on the cards despite concerns by US lawmakers and firms about foreign governments eating into US tax revenues.

It is unclear when and how the US will adopt the measures, which it signed up to last year, as they are included in President Joe Biden’s stalled $1.7tn Build Back Better plan.