[ad_1]
4 minutes of reading
A global corporation tax deal looks set to culminate a deeply entrenched battle of the European Union, which will see major members Germany, France and Italy versus Ireland, Luxembourg and the Netherlands. Read more.
While smaller EU partners, at the center of a years-long struggle for their favorable tax regimes, welcomed the Group of Seven agreement on 5 June for a minimum corporate rate of at least 15%, some critics foresee difficulties in implementing it.
The European Commission, the EU executive, has long struggled to secure agreement within the bloc on a common approach to taxation, a freedom that has been jealously guarded by all of its 27 members, large and small.
“Traditional EU fiscal resistances are trying to keep the framework as flexible as possible so that they can continue doing business more or less as usual,” said Rebecca Christie of the Brussels-based think tank Bruegel.
Paschal Donohoe, Ireland’s finance minister and chairman of the Eurogroup of his euro-zone peers, gave a lukewarm welcome to the G7-rich-countries deal, which needs to be approved by a much larger group.
“Any agreement will have to meet the needs of countries large and small,” he said on Twitter, pointing to the “139 countries” needed for a broader international agreement.
And Hans Vijlbrief, the Netherlands’ deputy finance minister, said on Twitter that his country has supported the G7 plans and has already taken steps to stop tax avoidance.
Although EU officials have privately criticized countries such as Ireland or Cyprus, confronting them in public is politically blamed and the blacklist of the blocking of “non-cooperative” tax centers, due to its criteria, makes no mention of the havens of the country. EU.
These have flourished by offering companies lower rates through so-called letterbox centers, where they can register profits without having a significant presence.
“Europe’s tax havens have no interest in giving up,” said Sven Giegold, a Green member of the European Parliament who fights for fairer rules, regarding the prospects for change.
However, Luxembourg Finance Minister Pierre Gramegna welcomed the G7 agreement, adding that it will contribute to a broader discussion for a detailed international agreement.
Although Ireland, Luxembourg and the Netherlands welcomed the long-fought reform, Cyprus had a more cautious response.
“Small EU member states should be recognized and taken into consideration,” Cyprus Finance Minister Constantinos Petrides told Reuters.
And even France, a member of the G7, may find it difficult to fully adapt to the new international rules.
“Even large countries like France and Italy have tax strategies that they are determined to keep,” Christie said.
The Tax Justice Network ranks the Netherlands, Luxembourg, Ireland and Cyprus among the most important global paradises, but also includes France, Spain and Germany in its list.
European divisions exploded in 2015 after documents dubbed “LuxLeaks” showed how Luxembourg helped companies channel profits by paying little or no taxes.
This has led to a crackdown on the part of Margrethe Vestager, the powerful EU antitrust chief, who has adopted rules preventing illegal state support for companies, arguing that such tax deals amount to unfair subsidies.
Vestager has opened an investigation into the Finnish paper packaging company Huhtamaki for back taxes in Luxembourg and the Dutch tax treatment of InterIKEA and Nike.
The Netherlands and Luxembourg denied that the agreements violate EU rules.
But it had setbacks like last year when the court issued its order to iPhone maker Apple (AAPL.O) to pay 13 billion ($ 16 billion) in Irish back taxes, a ruling that is now. subject to appeal.
Vestager’s order to Starbucks to pay millions in Dutch back taxes was also rejected.
Despite these setbacks, the judges agreed with his approach.
“Fair taxation is a top priority for the EU,” said a spokesman for the European Commission: “We remain committed to ensuring that all businesses … pay their fair share of taxes.”
The Netherlands, in particular, stressed a willingness to change after criticism of their role as a conduit for multinationals to shift profits from one branch to another by paying low or no taxes.
In January, it introduced a rule that taxes royalties and interest payments sent by Dutch companies to jurisdictions where the corporate tax rate is below 9%.
“The demand for equity has grown,” said Paul Tang, a Dutch member of the European Parliament. “And now it is combined with the need to finance investments.”
($ 1 = 0.8214)
[ad_2]
picture credit