Days after 136 countries agreed on an international tax deal, a European Commission official announced that an EU directive to implement the corporate minimum tax rate might be forthcoming before the end of the year.

In a panel discussion, Benjamin Angel, director of direct taxation and tax coordination at the Commission announced that the minimum corporate tax would be implemented at the European level “as quickly as possible”.

The tax deal agreed under the auspices of the Organisation for Economic Cooperation and Development aims to reduce tax competition among countries and tax evasion by corporations.

The deal contains two reforms in the global tax system. First, a part of profits of large companies should in the future be allocated to jurisdictions where the revenue is generated instead of where the companies’ headquarters are based. Secondly, it sets a minimum effective tax rate of 15% for large companies.

While the implementation of the first part of the deal is not scheduled for the coming months, the second part of the agreement could be implemented quickly.

Depending on how fast the OECD publishes its model rules on the implementation of the minimum corporate tax rate, the EU executive could propose a directive before the end of the year, according to Angel.

He stressed the importance of implementing the agreement at European level instead of on a national level.

More Tax Transparency

Angel also announced that the Commission would accompany the directive with an additional draft law to ensure transparency. According to this proposal, companies falling under the scope of the minimum tax rate would have to publish how much effective tax they pay in each jurisdiction.

“The content of the directive will be extremely simple. The effective tax rate, that you have to calculate per jurisdiction – make it public”, Angel said.

Meanwhile, the adoption of the tax agreement was endorsed by G20 finance ministers at a meeting in Washington DC on 13 October. EU Commissioner for economy Paolo Gentiloni called it “nothing less than a tax revolution.”

“The green and digital transition can only happen if it is based on fairness. So this reset of global corporate taxation is a fundamental part of the change we need to see: everyone must pay their fair share”, Gentiloni said in a statement.

Not all politicians share the enthusiasm about the agreement. Paul Tang, a social democrat EU lawmaker complained that the agreement had been negotiated between governments without involving the public and said that the minimum tax rate was too low.

“Hopefully, 15% will only be a starting point”, Tang said.

[Edited by Benjamin Fox]

Source: Euractiv.com