Will the EU Agree to the OECD’s Global Tax Overhaul?30th March 2022
Getting an EU directive passed is no easy job. Just ask anyone involved with the OECD’s two-pillar global tax overhaul. The problem is that all 27 member states have to agree to a directive to make it official and when you’re talking about a global tax redo, every country has its own agenda—making one country happy can lead to making another one mad. And the OECD’s two pillars are complicated. Pillar One reallocates taxing rights to countries based on where revenue is earned as opposed to where companies are headquartered, and Pillar Two calls for a global minimum tax of 15%, allowing headquarters countries to “top up” the tax rate of companies that pay below the minimum rate. While 140 jurisdictions agreed to the two-part proposal in October, implementing the global tax plan requires that individual countries adopt both pillars into local legislation. And while for countries like France, the implementation can’t happen fast enough, other countries are less enthusiastic—and they’re making their voices heard. Recently, Poland, Sweden, Estonia, and Malta voiced concerns about Pillar Two. Poland wants assurance that both pillars will be enacted, meanwhile, the other EU countries claim things are moving too fast and they won’t be ready for a tax revamp by the beginning of 2023—the proposed deadline to implement. And then there are doubts about the U.S.’ ability to get the plan through Congress, leaving Europe at a disadvantage. All fair points.
In mid-March, France offered a compromise—agreeing to implement the plan at the end of next year instead of the beginning—but Poland, Sweden, Estonia, and Malta blocked the motion. Then, later, all but Poland had a change of heart. Succumbing to pressure, officials from Malta, Estonia, and Sweden now say they’ll agree to the minimum tax as long as there is sufficient time to implement it. If that’s true, suddenly Poland is singlehandedly holding up the global tax overhaul for all of the EU. And we can’t help but notice, holding a lot of cards.