Pentus-Rosimannus was at Tuesday’s meeting of EU finance ministers where opposition to the package, which would help stamp out tax havens and ensure big businesses pay their fair share of tax, according to supporters, was expressed. Estonia is joined by Poland and Hungary in its opposition.
The package is divided into two pillars
The first pillar obliges the largest companies – with a turnover of more than 750 million euros per year – to pay taxes where they operate, and not only where they are registered, while the second pillar concerns the tax rates and caters to companies, including tech giants, paying their fair share of tax
While it had taken almost five years to reach an agreement on the scheme, at the OECD the EU is now moving quickly to make it a reality, with the European Commission having converted the second pillar into a bill of the EU at the end of December, and the deadline for implementation set in one year.
The bill for the first pillar is due in July, pending the signing of a multilateral agreement, still at the OECD.
Pentus-Rosimannus told the ERR that: “the current proposal for a directive does not leave EU Member States free to decide whether or not to apply a minimum tax at national level to companies above 750 million euros. – an agreement at OECD level actually provided for this possibility, so the European Commission has gone beyond the agreement here.”
Furthermore, Estonia is concerned that the tax package approved by the Organization for Economic Co-operation and Development (OECD) consists of two pillars – a digital tax and a minimum tax, but the launch of the first pillar could be delayed.
Support from the OECD does not necessarily equate to support from Estonia, the finance minister added.
“Although Estonia has given its consent to the tax agreed at OECD level, this does not mean that we automatically agree with the directive. The approval process is standard within the EU, a process in which Estonia can continue to defend its interests,” she continued.
According to the Estonian finance minister, the draft directive published by the European Commission on December 22 and presented to member states’ finance ministers on Tuesday largely takes into account Estonia’s interests and “maintains our current corporate tax system supporting jobs and investment”. “
“If we can find a solution to these concerns, there is no obstacle to the approval in principle of the project, at EU level, as early as March,” added the minister.
One of the main sticking points is the digital aspects of the proposed tax, which would force tech giants to pay taxes in every EU country in which they make a profit, including Estonia.
While the European Commission prepared and published a draft minimum tax directive in December, which now needs to be approved quickly, Pentus-Rosimannus said the draft should have come out in June.
The two aspects of the package, the minimum tax and the digital tax, must be addressed together, said Pentus-Rosimannus.
The minimum tax initiative is expected to come into force in 2023, as part of the OECD pact, but according to the Estonian interpretation of the pact, Estonia is not obliged to implement it at the national level.
An EU directive, however, means the tax should be applied uniformly across all member states.
The minimum turnover of 750 million euros, above which the tax applies, however means that the majority of companies will not be affected, said Pentus-Rosimannus.
“It has been a tense struggle for us and we succeeded. We were thus able to confirm yesterday that we will surely participate constructively in future discussions on the directive,” she continued.
Estonia has been joined by Poland and Hungary in protesting against the planned timetable agreed by the G20 countries in the fall.
Part of their concern is that US President Joe Biden will not be able to implement a similar regime in the United States, leaving Europe at a disadvantage.
EU tax deals need unanimous support.
A delay could damage the reputation of the EU at international level in the application of agreements that fight against tax evasion.
The two pillars of the OECD are indeed legally independent of each other.
Other countries, such as Sweden, say national legislation, for example, will hamper their progress in meeting the January 2023 deadline, although Sweden’s finance minister has said he is confident that a solution would be found.
Estonia agreed in principle to join the OECD reform in October.
Estonia’s current tax system
Estonia does not impose any corporate income tax on retained and reinvested earnings, which means that resident companies and permanent establishments of foreign entities (including branches) see a tax rate on the 0% income on all reinvested and retained earnings, as well as 20% income tax only on all distributed earnings. benefit.