“There are mysteries that need to be cleared up in Warsaw rather than in Luxembourg”, the French Minister for the Economy, Bruno Le Maire, said, visibly irritated, at the post-Ecofin Council press conference on Tuesday 5 April 2022. Poland’s refusal to approve the French Presidency’s latest compromise proposal, which incorporates the OECD agreement reforming the taxation of large companies (pillar II) into EU law, has blocked any unanimous political agreement in the EU Council.
“All the criticisms have been taken into account. All countries have made an effort. I regret that Poland does not understand this and puts forward arguments that I do not find convincing”, he concluded a few minutes earlier at the end of the public debate.
Since the March Ecofin Council (see EUROPE 12911/16), the French Presidency of the EU Council (FPEU) has proposed a number of substantial changes “to address all the legitimate technical issues” of some countries (see EUROPE 12922/13).
The three points of disagreement were the transitional optionality clause, the administrative burden for smaller Member States and the link between the two pillars of the OECD agreement. To address the first, the FPEU proposed to extend the time limits from 5 to 6 years and the number of parent companies concerned from 10 to 12. For the administrative burden, it has opened up the possibility of assistance from the European Commission. Finally, for the link between the two pillars of the agreement at the OECD, it has drafted a specific statement stressing the commitment to implement them.
These measures were enough to convince the remaining reluctant countries. “If there is a will, dedication and readiness to find solutions that will take into account justified concerns, it is possible to move really fast, solving all the technical issues that have been raised”, for example, stressed Keit Pentus-Rosimanus, Estonia’s Finance Minister. She praised the “extremely professional work” of the FPEU on this dossier and therefore accepted the compromise.
“An impossible legal relationship”
Poland does not share this view. “We maintain our position that both pillars should be considered as a package. We must sustain our goal of fully introducing the global two pillars solution to address the tax challenges arising from the digitalisation of the economy”, stressed Magdalena Rzeczkowska, the Polish State Secretary of Finance.
Although she assured during the public debate of “Poland’s dedication to introduce a fair and sustainable global system to combat tax avoidance and tax evasion”, she said that “we should be mindful of the inadequacy of placing additional burden on European businesses under pillar 2 without ensuring the digital giants are fully taxed under pillar 1”.
“A legal link is impossible, you cannot make a European directive dependent on an international agreement. Otherwise, you weaken European sovereignty”, Mr Le Maire told the press.
“While reaffirming the uncontroversial political link between the two pillars of the OECD agreement, the EU Council statement circulated by the presidency avoids difficulties and legal risks”, commented Paolo Gentiloni, the European Commissioner for Economy, during the public debate.
If Poland is just repeating the same justifications, some European diplomats, according to our information, believe that the country is using this agreement as a means of pressure to get its recovery plan approved by the European Commission (see other article). “An absurdity”, said a Polish diplomat, interviewed by EUROPE.
The FPEU hopes that an agreement will be reached by the end of June, as there are two ministerial meetings in May and June.
Parliament calls on EU Council to adopt directive
On Monday 4 April, in Strasbourg, MEPs at the European Parliament plenary session expressed the urgent need to adopt the directive.
European Commission Vice President Frans Timmermans “urged the EU Council to adopt the minimum tax rate now and not to delay this adoption because of the work on the other pillar”. Beyond the importance of “preserving the EU’s reputation as a leader” in multinational taxation and advancing “social justice”, he warned of the risk of an immediate loss of tax revenue.
Like many of his colleagues, MEP Ernest Urtasun (Greens/EFA, Spain) criticised the reticence of some countries. “There is no difficulty, the directive is just a copy paste of the OECD agreement and even with that, not all Member States are happy”, he lamented. He described the unanimity on tax issues as a “ growing problem”.
Aurore Lalucq (S&D, France) called on Estonia and Poland to “show responsibility and solidarity”. “We have finally decided to blow the end of ‘recess’ whistle”, she said, arguing that her group also had “its reasons for not liking this agreement”, as it would have liked a higher minimum tax rate than 15%.
The Left MEPs, such as Portuguese MEP José Gusmão and French MEP Marion Aubry, criticised the agreement at the OECD, calling it “insufficient”, as it concerns too few companies. Finally, MEPs from the EPP and ECR groups disagreed on the urgency of implementing this directive. (Original version in French by Anne Damiani)