“The OECD’s Pillar II is a major milestone, a transformation for the EU”, said Benjamin Angel, Director of Direct Taxation, Tax Coordination, Economic Analysis and Evaluation at the European Commission’s DG TAXUD, at a forum organised by the Confédération Fiscale Européenne (CFE) on Thursday 20 April.
It is worth noting that the OECD agreement, composed of two pillars, aims to fight against tax base erosion (see EUROPE 13122/19). Pillar I consists of a tax on the digital sector, while Pillar II provides a minimum 15% tax on multinationals. The EU Council approved the Directive implementing Pillar II (see EUROPE 13085/8) in December 2022.
Mr Angel recalled that taxation is not at all covered by the treaties that founded the EU; it remains a competence of the Member States and requires the unanimity of the EU Council. “Unanimity is a pain but not a complete stop”, he explained. In his view, it is easier for Member States to agree on what not to do than on what to do. “Compromise is sometimes built at the expense of clarity, as with the ‘DAC6’ Directive on administrative cooperation, which is not as homogeneous as one would like”, he continued.
However, there is, according to Mr Angel, “a useful emulation between the OECD and the EU”, which makes it possible to go further in the texts. “With Pillar II, it is the first time that tax rates are covered”, he said. The expected revenues from the implementation of the Directive will, among other things, pay off the EU’s debt from the 2020 Next Generation EU Recovery Plan. However, he stressed that the ratification of Pillar I would be a challenge.
As for the next steps to be taken, he mentioned the issue of teleworking. “The world is facing structural breakdown, a permanent solution is needed”, he said.
Although much has been achieved in the area of taxation since the creation of the EU, the European system is “more complicated and more fragmented than in other regions of the world”. However, he was not in favour of full harmonisation. “It would not make sense; the financial needs are not the same depending on the national debt”, he concluded.
For the business representatives participating in the forum, Pillar II is a reporting challenge, but also a risk because of the lack of human resources trained in this new legislation. (Original version in French by Anne Damiani)