Poland and Hungary will not support the plan to introduce a minimum level of global tax approved by G7 finance ministers this weekend, unless there is a sculpture to protect substantive trade activity in their countries, according to their finance ministers.
The position taken by the two Central European countries suggests that resistance to an agreement in the European Union could extend well beyond Ireland and other destinations favored by multinationals seeking to minimize their tax burdens. .
“We should not let the G7 dictate what taxation we have in our country,” Tadeusz Koscinski, Poland’s finance minister, told the Financial Times. Setting a lower tax rate was an important way for countries to catch up with more advanced economies by attracting innovation from abroad, he said.
But Koscinski also insisted that Poland, which has a 19 percent corporate tax rate, did not want to attract businesses to Poland for the purpose of minimizing its tax burden.
He said any global agreement should distinguish between profit sharing and “substantial business activity”.
“We do not support the idea of a minimum tax on the profits that companies make in Poland for companies in Poland,” he said.
Any global deal should have a “substantial drop in home-made businesses,” he added. “Whatever happens, the devil is in the ring. Some G7 countries may be fighting against this.”
Hungary, which has a corporate tax rate of only 9 percent, the lowest in the EU, has taken a similar line.
In a statement, his finance minister said that countries “should be given the right to make their own sovereign decisions” on the imposition of “substantial economic activities carried out on their territory … taking into account the level of economic development and other relevant factors ”.
“Therefore, a tax increase is not supported by the government in the case of companies with substantial economic activity,” the ministry said.
The OECD’s original 2020 plan for a global tax deal proposed a sculpture for substantial business activities such as plants or buildings – in fact focusing the minimum tax on the distribution of profits by the companies of multinational companies.
However, American proposals have paved the way for the scheme deal among the G7 finance ministers Saturday does not contain a franchise, substantially extending its scope.
Pascal Saint-Amans, director of the OECD’s Center for Tax Policy and Administration, said an event last month that a global agreement was “not realistic” without some form of sculpting for tangible assets.
Any exemption and definition of substantial trade activities are probably one of the most important points as discussions move from the G7 to the wider group of countries meeting by the OECD in the coming weeks.
The proposed minimum tariff does not require unanimous approval to take effect, but the other “pillar” of the reform – the right to tax a portion of profits from sales in a particular country – does. This gives an individual leverage to the capitals in the negotiations.
Separately, Brussels announced its intention to promulgate the possible OECD tax agreement through EU legislation, to ensure uniformity throughout the bloc. This will also require unanimity among EU member states.
Cyprus is another EU state favored by world companies. Cypriot Finance Minister Constantinos Petrides said in a statement that the country will show “a constructive spirit if equal conditions are guaranteed for all countries and safeguard their interests while the position of smaller Member States must be taken into account. seriously “.
The country has a rate of 12.5 per cent, but the Cypriot government says it is in fact supplemented by an additional dividend tax on the company’s profits.
More information from Eleni Varvitsioti in Athens