Global Tax Troubles for the EU20th January 2022
You have to hand it to the OECD—its two-pillar global tax plan is pretty clever. To get the whole world to agree to it, the organization had to dangle a carrot that was irresistible to the U.S.—i.e. the global minimum tax of 15%—and also, one that would entice the EU, a bloc of 27 countries with an often opposing agenda to the superpower across the pond. But Pillar One sure did the trick. The proposal reallocates tax revenue generated by the world’s digital giants based on where customers reside as opposed to where a company is physically located. Well played, OECD. Unfortunately, though, implementation isn’t looking so seamless. While Pillar Two, the 15% global minimum tax, is gearing up for a 2023 debut, Pillar One is still under technical and legal development. The separate timelines mean problems for just about everyone, but especially for France’s President Emmanuel Macron, who, given France’s six-month bloc presidency, has to motivate a finicky group if he wants to get the unanimous buy-in the EU needs. Sweden, Estonia, Malta, and Bulgaria have already warned that having Pillar Two in full swing by 2023 is just too soon. Add to that, Estonia, Malta, Bulgaria, Hungary, and Poland plan to implement the global minimum tax only if and when Pillar One is also ready to go. European finance ministers will meet in Brussels this week to discuss implementation with President Macron. And while the results of the meeting are anybody’s guess, we do know one thing for sure: President Macron has his work cut out for him.