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Opinion of the European Economic and Social Committee on the Proposal for a Global Minimum Level of Taxation for MNE Groups in the EU — Orbitax Tax News & Alerts

On 29 July 2022, the opinion of the European Economic and Social Committee (EESC) was published in the Official Journal of the EU on the proposal for a Council Directive on ensuring a global minimum level of taxation for multinational groups in the Union. The EESC is a consultative body that gives representatives of Europe's socio-occupational interest groups and others a formal platform to express their points of view on EU issues. Its opinions are addressed to the Council, the European Commission, and the European Parliament. In the opinion, the EESC expresses overall support for the European Commission proposal to transpose the GloBE Model Rules included in Pillar 2 of the OECD/G20 two-pillar solution, along with the following specific comments and considerations.


Specific Comments

4.1. It is important that other tax provisions enacted by parliaments in Member States as deliberate incentives for investments and employment efforts are not neutralised by the Model Rules. Rules in place for a long time, for instance allowing for accelerated depreciation for fixed investments, incentives for R&D activities or newer initiatives to promote the development of a greener and more digitalised economy, should not be inhibited. This applies both to the economic recovery initiatives in connection with the pandemic, but also to future technological developments, which should be encouraged.

4.2. The implementation of the GloBE Model Rules in the EU will impact on existing provisions of the Anti-Tax Avoidance Directive (ATAD) and, more specifically, on the Controlled Foreign Company (CFC) rules, which could interact with the Income Inclusion Rule (IIR) as the basic rule of Pillar 2. The Commission Communication on Business Taxation for the 21st Century stated that governments have engaged in adopting a patchwork of anti-tax avoidance and evasion measures and that the measures have added further complexity. Even if it is not necessary to amend the ATAD, a review of the effectiveness and the administrative burden of the combined rules could be beneficial, both for tax administrations and businesses.

4.3. The EESC shares the Commission's view that the transposition of the GloBE Model Rules in the EU could pave the way to agreement on the pending proposal to recast the Interest and Royalties Directive (IRD).

4.4. The EESC calls for close monitoring of the effectiveness of the rules and the administrative costs. Member States should avoid excessive use of tax rulings if they are harmful to the provisions of the global agreement.

4.5. The EESC agrees with imposing penalties for non-compliance and calls on Member States to perform thorough tax inspections to ensure full compliance with the Directive's provisions.

4.6. The EESC calls for a revision of the EU list of non-cooperative third countries in light of the implementation of the agreed OECD tax package.

4.7. The EESC would like to point out that the fair taxation of multinational companies represents a long-standing request from the general public and expects a swift agreement on Pillar 2 in the EU and world-wide.