Luxembourgh Times

Macron’s push for EU to implement global tax deal hits hurdles

Sweden, Estonia, Malta and Bulgaria warn the EU’s agreed timeline - to put new tax structures into effect by next year - is too ambitious

French President Emmanuel Macron

French President Emmanuel Macron © Photo credit: AFP

Source: Bloomberg

European Union countries are sceptical that President Emmanuel Macron will be able to use France’s six-month presidency of the bloc to jumpstart the implementation of a minimum corporate tax, adding to risks of delays to the broader global overhaul.

For Macron, who led the charge for international tax overhaul in recent years, swift action would boost France on the world stage and burnish his own political stature at home ahead of elections in April.

But Sweden, Estonia, Malta and Bulgaria are warning the EU’s agreed timeline - to put new tax structures into effect by next year - is too ambitious, according to an EU official briefed on the discussion. European finance ministers are set to discuss the topic in Brussels on Tuesday.

In a further complication, Estonia, Malta, Bulgaria, Poland and Hungary want progress on the minimum tax conditioned to the other part of the global deal - relating to the taxation of digital multinationals - that is still bogged down in technical and legal work, the EU official added.

Inertia in the EU would add further uncertainty about whether what was heralded as a landmark breakthrough for multilateral diplomacy will ever come into force.

The political dynamics of the deal were always delicately balanced. Europe had pushed for the digital element to ensure a fairer distribution of profits and taxing rights among countries for big multinationals, while the US prioritised the minimum tax. Both sides have said the two elements must stand together, yet because they are moving on separate tracks, the EU is only able for now to push ahead with the part of the deal the US initially supported.

Stalled in Congress

In Washington, meanwhile, both parts of the deal face problems in Congress. Measures necessary to implement the minimum tax attracted little opposition, but were attached to President Joe Biden’s massive 10-year tax and spending plan that collapsed in December. White House officials are currently negotiating with lawmakers on a scaled-back version that would still include the minimum tax provisions, but no deal has yet emerged.

Separately, Congress must also approve changes to US tax law to bring it into line with the plan to reallocate some corporate taxes. Winning enough support in the Senate appears uncertain. Moreover, it may be difficult to even formulate the legislation and schedule a vote this year. Most US lawmakers face an election in November, and campaigning traditionally cuts deeply into the calendar for both houses of the legislature in election years.

Ahead of this week’s finance ministers meeting in Brussels, a French official said Paris still aims to push through the adoption of a directive on minimum tax within the next six months. While France is committed to both parts of the deal, they are completely separate in a legal sense, the official added, speaking on condition of anonymity.

France will intensify its efforts to convince the sceptics over the next two months, as the country intends to make decisive progress during the EU finance ministers’ meeting scheduled for March, a senior EU diplomat says.

The commission plans to advance on both pillars as quickly as possible, another EU official said. But Europe should not wait for progress on the digital element to start discussions on the corporate tax plan, the official added, because it could delay implementation of the minimum tax enough to undermine the global deadline for a deal, the official added.

©2022 Bloomberg L.P.