The EU has said it will suspend its plans to tax online tech giants in the light of global efforts to agree a minimum corporate tax rate of 15%.<\/p>\n\n\n\n
The move comes after G20 finance ministers agreed at the weekend to support the global effort, which will now go before G20 leaders in October.<\/p>\n\n\n\n
The EU said putting its own plan on ice would make it easier to achieve “the last mile” of the international deal.<\/p>\n\n\n\n
But Ireland declared it would stick to its lower tax level of just 12.5%.<\/p>\n\n\n\n
“We have decided to put on hold our work on our new digital levy,” said European Commission spokesman Daniel Ferrie.<\/p>\n\n\n\n
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The announcement coincided with a visit to Brussels by US Treasury Secretary Janet Yellen, who urged all 27 EU countries to join the global deal.<\/p>\n\n\n\n
“We need to put an end to corporations shifting capital income to low-tax jurisdictions, and to accounting gimmicks that allow them to avoid paying their fair share,” she said.<\/p>\n\n\n\n
Higher revenues
However, Ireland’s Deputy Prime Minister Leo Varadkar, said his country’s 12.5% corporate tax rate had “worked for Ireland” and said the reform plan was about “big countries trying to get a bigger share of the pie”.<\/p>\n\n\n\n
“We’ve taken about \u20ac10bn a year in corporation profit tax, double what the average European country does per head,” he said.<\/p>\n\n\n\n
“It’s one of those examples of where low taxes result in higher revenues, in a world where wealth capital, labour, corporations are very mobile.”<\/p>\n\n\n\n
Governments have long grappled with the challenge of taxing global companies operating across many countries.<\/p>\n\n\n\n
That challenge has grown with the boom in huge tech corporations such as Amazon and Facebook.<\/p>\n\n\n\n
Efforts in the UK and EU to tax the online giants have caused friction with the US, which has felt its companies are being unfairly targeted.<\/p>\n\n\n\n
Now, however, there is widespread support for a plan to make multinational companies pay their “fair share” of tax around the world.<\/p>\n\n\n\n
So far, 132 countries have signed up to the framework, but it needs ratification from those countries’ parliaments – including the US Congress, where Republicans may try to block it.<\/p>\n\n\n\n
Why change the rules?
At the moment, companies can set up local branches in countries that have relatively low corporate tax rates and declare profits there.<\/p>\n\n\n\n
That means they only pay the local rate of tax, even if the profits mainly come from sales made elsewhere. This is legal and commonly done.<\/p>\n\n\n\n
The deal aims to stop this from happening in two ways.<\/p>\n\n\n\n
Firstly it aims to make companies pay more tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits.<\/p>\n\n\n\n
Secondly, a global minimum tax rate would help avoid countries undercutting each other with low tax rates.<\/p>\n\n\n\n
Not everyone is in favour, however. Apart from Ireland, Hungary and Estonia also oppose plans to harmonise rates.<\/p>\n","protected":false},"excerpt":{"rendered":"
The EU has said it will suspend its plans to tax online tech giants in the light of global efforts to agree a minimum corporate tax rate of 15%. The move comes after G20 finance ministers agreed at the weekend to support the global effort, which will now go before G20 leaders in October. The […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-448","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\n