New EU Tax Proposals Later if OECD Talks Fail, Top Official Says

May 28, 2020, 2:41 PM

The European Commission could propose an EU-wide digital services tax and a minimum tax on multinationals in 2021, the bloc’s top tax official said Thursday.

The digital tax proposal, which would hand some direct tax-raising power to the European Union, would help pay for the bloc’s spending plans through 2027, which have ballooned because of the need to recover from the economic crisis caused by coronavirus, Paolo Gentiloni, the EU’s economy commissioner, said at a news conference in Brussels.

“We should be more ambitious on taxation,” Gentiloni said.

But the commission will wait for the outcomes of international tax discussions taking place in the Organization for Economic Cooperation and Development before making any proposals, he said.

The Paris-based OECD is working on proposals covering taxation of digital services according to where revenues are generated, and on setting a global minimum corporate tax level.

The OECD is due to deliver its proposals to Group of 20 leaders when they meet in November in Riyadh, Saudi Arabia. The proposals would cover the 137 countries and jurisdictions covered by the OECD/G20 Inclusive Framework on base erosion and profit shifting.

The European Commission is “committed to this global exercise,” on which some progress has been made, though “we are not yet with an agreement,” Gentiloni said.

The commission renewed its call for direct EU tax-raising powers on Wednesday when it presented a revised budget and a coronavirus recovery plan amounting to 1.85 trillion euros ($2.04 trillion) through 2027.

In addition to a digital tax, the bloc could secure revenue from levies on plastic waste, carbon-intensive imports, and emissions trading, according to the budget plan. The commission has also suggested a separate levy “based on operations of enterprises” in the EU single market, though it has given no further details of what form this might take.

“New common EU taxes targeting the most-profitable corporations could answer the need to pay for the recovery and, at the same time, limit corporate tax avoidance,” said Chiara Putaturo, EU inequality and tax policy adviser at Oxfam, in an email Thursday.

Any tax proposals made by the commission would have to be unanimously approved by the EU’s 27 members, which have so far resisted handing taxation powers to the bloc. Member states failed to agree on an EU-wide digital tax that the commission proposed in 2018, and have labored fruitlessly for years trying to agree on a common consolidated corporate tax base.

To contact the reporter on this story: Stephen Gardner in Brussels at correspondents@bloomberglaw.com
To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Joe Stanley-Smith at jstanleysmith@bloombergtax.com

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