Cyprus could block the adoption of a corporate minimum tax plan by the EU | Taxes and expenses
Cyprus could veto the EU’s adoption of Joe Biden’s proposal for a global minimum corporate tax rate, the country’s finance minister suggested.
A White House proposal for a 15% tax rate for multinationals applied to profits in all jurisdictions is expected to be endorsed in principle by the finance ministers of the world’s seven largest economies, the G7, in a next meeting in Cornwall.
The intention is to prevent multinationals from transferring their profits across borders to exploit the most attractive places with low taxes.
Under the proposal, if companies seek to register their profits in a low-tax jurisdiction, the country in which the multinational is headquartered would impose additional taxes to ensure that the global minimum rate continues to apply.
There is significant support for the idea within Europe, but speaking to the European Parliament’s committee on economic and monetary affairs, Cyprus Finance Minister Constantinos Petrides said his government would oppose an EU directive limiting the formulation of national fiscal policies. An EU directive on taxes would require the unanimous support of all 27 member states.
Cyprus and Ireland have the lowest corporate tax rates in the EU (12.5%), and both countries have framed the debate as one of national sovereignty.
“We are in favor of maintaining the policy of setting the tax rate as a national competence, maintaining an adequate level of corporate tax rate for the sustainable development of the economy and investments,” said Petrides.
Sven Giegold, a German MEP who is the Greens’ finance spokesman in the European parliament, said a “coalition of the willing” within the EU should still endorse the Biden plan.
He said: “It is an illusion to think that we can make significant progress on tax matters without exploring alternatives to the principle of unanimity in the council.
“We have to prevent European tax havens like Ireland and Cyprus from sabotaging much-needed progress on tax matters.
“Rather than huddle with the tax havens of the interior of Europe, European countries should join the US in developing a progressive tax agenda.”
Biden had initially proposed a global tax rate of 21%, but the level has been lowered after negotiations with other major economies.