On Monday 12 July, the European Commission announced that its work on its digital levy proposal will be put on hold until the autumn, to support the finalisation of the agreement on international tax reform approved by the G20 Finance Ministers in Venice on Saturday 10 July (see EUROPE 12757/17).
The G20 Finance Ministers gave the green light to the technical agreement reached in early July by the G20/OECD Inclusive Framework on Tax Base Erosion and Profit Shifting (see EUROPE 12753/1). In the communiqué issued at the end of the meeting, they welcomed the fact that they had reached “a historic agreement on a more stable and fairer international tax architecture”.
In the context of these negotiations, the US has been pressing the EU from the outset to drop its proposal for a digital levy, which it says would derail the international negotiations and discriminate against American companies.
On Sunday, US Treasury Secretary Janet Yellen again called on the EU to reconsider its plan, noting that the agreement approved by the G20 Finance Ministers calls on participating countries to abolish their existing digital levies and to refrain from introducing similar measures in the future.
Until now, the European Commission has insisted that it would stand by its proposal, stressing that it would have a different scope to the international reform and would not conflict with the future global agreement. The proposal, which was originally to be presented on 14 July, had already been postponed for a week, until 20 July.
“The G20 created the OECD/G20 Inclusive Framework to swiftly address the remaining issues and to finalise the various design elements, together with a detailed implementation plan by October. Successfully concluding this process will require a final effort, a final push from all parties, and the Commission is committed to focussing on that effort. For this reason, we have decided to put on hold our work on a proposal for a digital levy, as an EU own resource during this period”, said Daniel Ferrie, a Commission spokesman.
Janet Yellen in Brussels
On Monday, discussions on this topic were held in Brussels, between Janet Yellen and the President of the European Commission, Ursula von der Leyen. There were also individual meetings with the Executive Vice-President of the European Commission, Valdis Dombrovskis, and the European Taxation Commissioner, Paolo Gentiloni.
“I informed Secretary Yellen of our decision to put on hold the proposal of the Commission of a digital levy to allow us to be concentrated, working hand in hand, to achieve the last mile of this historic agreement,” Gentiloni said, describing the meeting as “ excellent”.
On the same day, Ms Yellen also addressed the Eurogroup (see EUROPE 12759/10). When questioned by the press on her arrival at the meeting, she declined to comment on the Commission’s announcement.
German Finance Minister Olaf Scholz welcomed the decision to postpone the proposal and saw it as “a sign that we are now really making progress to get a global agreement”.
Unwilling countries still need to be convinced
The G20 Finance Ministers also invited all members of the Inclusive Framework to join the agreement. This call was heard by St Vincent and the Grenadines, which recently signed the declaration, bringing the number of countries supporting the agreement to 132. Ireland, Hungary, Estonia, Kenya, Nigeria, Sri Lanka and Barbados all remain to be convinced.
“Ireland will continue to engage in the negotiations and the process within the OECD all the way up until October (...) I really want an agreement to be reached within the OECD”, Eurogroup President Paschal Donohoe told a press conference on Monday evening, underlining that this was also the message he had conveyed to Ms Yellen during their meeting on Monday morning. He also recognised the negative impact on “stability” that a failure of the negotiations would have.
Paolo Gentiloni said that he was “very hopeful” that by October, all EU Member States would reach a consensus on the issue.
See the G20 Finance Communiqué: https://bit.ly/36w83NG (Original version in French by Marion Fontana)