Daily Management Review

EU Postpones Its Own Tax Plan After US Pressure And G20 Endorsing Wider Global Tax Plan


EU Postpones Its Own Tax Plan After US Pressure And G20 Endorsing Wider Global Tax Plan
After facing pressure from the United States administration, a corporate tax plan for the bloc was delayed by the European Union. This decision was also influenced by its intention to facilitate a broader global tax deal.
However its criticisms of the wider tax reform were reiterated by EU member state Ireland, which is a tax haven for multinationals targeted by the new global tax reforms.
On Sunday, a plan for a global overhaul of corporate tax that include imposition of a minimum global corporate tax rate and changes in the way large companies such as Amazon and Google are taxed, was endorsed by the finance minister of the 20 largest economies of the world in a G20 summit in Venice, Italy. The new tax plan aims to force large multinational companies to pay taxes in the countries where they sell their products and services and makes profits instead of their headquarters – often located in low tax countries., 
The reform is to come up for discussions among the leaders of G20 countries in October this year and if they are finalised, the plans would then have to be approved by parliaments in the more than 130 countries that support it, including the United States Congress where it could face opposition from the Republicans.  The tax reforms, including the envisioned global deal, will also have to be approved by all EU member states.
One of the perceived potential hurdles to the deal was the EU’s own tax plans which was eliminated on Monday with the EU delaying the imposition. The EU planned to impose a separate levy of its own on online sales. The US administration was concerned that this new taxation plan of the EU could have led to more criticism of the global tax overhaul in the US Congress.
"We have decided to put on hold our work on our new digital levy," EU commission spokesman Daniel Ferrie told a news conference in Brussels on Monday. the situation wil be reassessed by the EU in autumn, he added.  The EU tax proposal had been planned for later in July.
The EU announcement came at a time when US Treasury Secretary Janet Yellen is visiting Brussels and was also preceded by repeated pressure from her during a G20 summit at the weekend and before.
It would be easier to concentrate on achieving "the last mile" of the global deal because of the postponing the bloc's plan, EU economics commissioner Paolo Gentiloni told journalists.
However the global tax deal will face some opposition including from three EU members states - Ireland, Hungary and Estonia.
The proposed minimum 15 per cent corporate tax rate will not be supported by it, Ireland has said. The minimum tax rate is aimed at preventing multinational companies from doing business all around the world and declaring profits from countries that have the lowest tax rate. A number of such multinational companies have made Ireland’s Dublin their EU headquarters because of the very low corporate taxes there – effectively ending up paying much less in taxes than they otherwise would have.