EU’s way forward on global minimum tax up for debate – MNE Tax


By Doug Connolly, MNE Tax

EU member states disagree on various issues related to the directive to implement within the EU the global minimum tax part of the OECD agreement, with several members expressing concern on key aspects at a public meeting of the Economic and Financial Affairs Council on 17 January.

During the debate, EU Member States’ economy and finance ministers disagreed on the extent to which the implementation of the global minimum tax (second pillar of the OECD agreement) should be legally linked to the other part of the OECD agreement relating to a reallocation of taxing rights between nations (first pillar). Ministers also expressed their concerns about the timetable for implementation and the rules for national application within the EU.

The French Presidency of the Council of the European Union began this month and will continue until June. Bruno Le Maire, French Minister of Economy, Finance and Recovery, called for the adoption of the minimum tax directive within the EU in the first half of 2022 as a priority of the French Presidency.

Opening the Council debate, Le Maire noted that all EU member states had already approved the OECD tax deal through the October 8 agreement. As such, he suggested that it would be dishonest for states not to agree to the proposed directive to implement the agreement within the EU, as the directive has been drafted to follow model rules closely. of the OECD, except for some changes to comply with EU rules. law.

As a result, Le Maire pushed for rapid implementation, expressing hope to continue discussions and adopt the directive at an upcoming meeting on March 15.


EU Economics Commissioner Paulo Gentiloni reiterated the call for the directive to be adopted quickly, i.e. during the French presidency in the first half of 2022. Gentiloni noted that this will be necessary for countries to transpose laws at the national level in order to respect the deadline agreed within the framework of the OECD. agreement, which foresees implementation in 2023.

“Our proposal should ensure the timely entry into force of the model rules in all member states by the same deadline next year, as we and all our global partners have committed to,” Gentiloni said.

However, not all EU Member States consider the question of the timetable for implementation to be resolved.

The Hungarian finance minister said that “the presidency’s intention to finalize the directive in the first half of the year and to start applying the rules on January 1, 2023 is too ambitious”. As well as pointing out compliance issues for businesses, he explained that “the complexity of the issue requires Member States to have enough time to analyze and implement the directive”.

Sweden was also among the states that consider the timetable too ambitious. “An operational system by 2023 is a problem for us, given our national constitutional and legislative requirements,” the Swedish government noted – adding, “we look forward to further discussions on the implementation date.”

Contingency Pillar 1

Some EU Member States would like to move forward with the implementation in the EU of the second pillar minimum tax while the OECD continues to work on the technical details of the first pillar, which would then require a multilateral convention.

German Finance Minister Christian Lindner acknowledged a political link between the two pillars, but criticized the imposition of a legal link between them. He suggested that “the best way to progress on Pillar One would be to apply Pillar Two and progress there as quickly as possible. … We have to maintain the momentum.

Austrian Finance Minister Magnus Brunner also voiced support for the two pillars independently of each other, saying he sees “no need at all to lock in their implementation or make the adoption of one pillar of the other”.

Similarly, the Dutch government asserted that “the technical work on the first pillar should not prevent us from moving forward with the second pillar”.

Poland, however, said it disagreed with Pillar Two without being tied to Pillar One. “We must insist on putting in place legal safeguards to ensure that both pillars are implemented,” said the Polish government. “It’s important to make sure that both pillars start working at the same time.”

Likewise, the Estonian Minister of Finance noted “that it is very important to keep in mind” that the overall reform, to which Estonia has subscribed, is based on two pillars. Accordingly, she said the EU must work on safeguards to ensure the implementation of both pillars, noting that “it is not very clear at the moment how we are going to progress with the first pillar… at the World level”.

Similarly, Hungary argued that the EU would weaken its negotiating position at the international level if it implemented Pillar Two before “other countries… fulfill their political commitments on Pillar One”. Accordingly, the Hungarian Minister of Finance stated that “both pillars should be treated together and developments in the second pillar should be parallel to the implementation of the first pillar”.

National request

Regarding the proposed directive for the implementation of minimum tax within the EU, Gentiloni explained that “the directive treats cross-border and purely national multinationals in the same way. This equal treatment is necessary to ensure compatibility with the EU Treaties and with the fundamental freedoms of the European Union.

However, Estonia considers the approach to go beyond the OECD agreement, and this is the country’s “biggest concern at the moment” (although not the only one). The Estonian finance minister said that “the mandatory implementation which could impact not only multinational companies but also internally…this was not part of the OECD agreement”. She added that “the objective of the OECD agreement, of which we are also a part, is to combat the erosion of the tax base in cross-border situations”.

Furthermore, Estonia also called for changes “to prevent the erosion of the de minimis exemption” by introducing an “indexation mechanism” in the model rules.

Doug Connolly is editor of MNE Tax. He has over 10 years of experience in tax legal developments, having previously worked with both a Big Four firm and a leading legal publisher. He holds a law degree from the American University Washington College of Law.

Doug Connolly
Doug Connolly

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