The EU member states agreed this week on an EU minimum tax for corporations of 15 percent. For the network attac, which is critical of globalization, a minimum tax is welcome in principle, but the concrete implementation remains completely inadequate. Because, as so often, the devil is in the details. Attac criticizes the fact that the tax is much too low, its scope is much too narrow and the income is unfairly distributed.
Tax rate is based on tax swamps
“Since 1980, the average tax rates for corporations in the EU have more than halved from just under 50 to under 22 percent. Instead of finally bottoming out at around 25 percent, the minimum tax rate of just 15 percent is based on tax swamps like Ireland or Switzerland,” criticizes David Walch from Attac Austria. Attac also sees the danger that this minimum tax, which is far too low, will even fuel tax competition in numerous EU countries with tax rates of over 20 percent. In fact, corporate lobbies in many countries have already stated that the 15 percent is an opportunity to further reduce corporate taxes.
Attac calls for a minimum tax rate of 25 percent and a trend reversal in the international downward tax race.
90 percent of companies are not affected
The scope of the tax is also insufficient for Attac; because it should only apply to multinational corporations with sales of more than 750 million euros. This means that 90 percent of all corporations in the EU are exempt from the minimum tax. “There is no justification for setting the threshold that high. Profit shifting is not only widespread among corporate giants - unfortunately it is part of the general practice of multinational corporations," criticizes Walch. Attac is calling for the minimum tax to be introduced from sales of 50 million euros – the threshold with which the EU itself defines “large companies”.
And the minimum tax is also highly problematic from the perspective of global justice. Because the additional income should not go to where the profits are made (often poorer countries), but to those countries in which the corporations have their headquarters - and thus primarily to rich industrialized countries. “The minimum tax massively disadvantages poorer countries, which are already suffering most from profit shifting. The principle of taxing corporations fairly where they generate their profits is not being achieved,” criticizes Walch.
The basis of the EU agreement is the so-called Pillar 2, the OECD reform of international taxation. The regulation does not specify how high the tax rate has to be in each country, but allows states to subsequently tax any difference to the minimum tax in a low-tax country themselves. US President Biden originally proposed 21 percent. The original OECD formulation of “at least 15 percent” was already a concession to the EU and its tax swamps. In the negotiations, however, Ireland was able to get the minimum tax rate capped at 15 percent and not set at "at least 15 percent". This further weakens the tax and deprives all states of the opportunity to introduce a higher minimum tax themselves.
In principle, however, the approach would be an effective means of ending the ruinous competition for the lowest tax rates, since such a regulation can also be implemented without the consent of the worst tax swamps.