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German and French finance ministers said on Tuesday they support the idea of a minimum 21% corporate tax rate on profits, a proposal launched by the US government, Reuters reports, as related by Agerpres.
“Personally, I have nothing against the US proposal,” German Finance Minister Olaf Scholz said in an interview with Zeit Online. “If this is the end result of the negotiations, we would also agree,” said French Finance Minister Bruno Le Maire.
The introduction of a minimum threshold for corporate taxation, intended as a way of discouraging the behavior of tax dumping countries, such as Ireland, can be problematic for Romania, which has some of the lowest tax corporate rates at 16%, except for micro-enterprises, which pay tax on revenue rather than on profits.
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Hungary describes the idea as a “violation of financial sovereignty”.
“This concept violates the financial sovereignty of states and also seeks to reverse the progress of those countries that have made serious efforts to introduce lower taxes,” Norbert Izer, secretary of state for tax revenue service, told the daily Magyar Nemzet. quoted by MTI news agency.
In fact, the European Commissioner for the Economy, Paolo Gentiloni, had announced since March 2020 a series of radical changes to the tax regime in the EU. One of these changes is the introduction of a minimum threshold for corporate taxation, so as to discourage the behavior of tax dumping countries, such as Ireland, but which would also affect the competitiveness of the Romanian economy.
Another change proposed by the European official at the time was a radical change in the mechanism for making the EU decision on taxation. Thus, Gentiloni said that he wants the decisions on taxation in the EU Council (meeting of Member States) to be taken more simply, with a qualified majority instead of unanimity. However, such a change would make it extremely difficult for some affected Member States (such as Ireland, Romania, Hungary) to block the imposition of a minimum income tax that is higher than the taxes levied by those countries.
Earlier this month, US Treasury Secretary Janet Yellen announced that the US would put pressure on G20 partners to adopt a globally valid minimum corporate income tax, and advanced the 21% figure.
A tax rate of 12.5% for multinational companies has also been discussed in the new rules negotiated in the Organization for Economic Co-operation and Development (OECD), which is also preparing a plan for a global minimum tax rate.
Olaf Scholz and Bruno Le Maire will have a round of talks on Tuesday, and the topics will include accessing money from the European Recovery and Resilience Facility Fund.
The discussions about imposing a minimum tax rate on corporate profits in the EU, but also in the US, comes amid attempts to stop the dumping practices of some states that have set low tax thresholds to attract large multinational companies.
Translated from Romanian by Service For Life S.R.L.