Receive free corporate tax updates
We will send you a myFT Daily Digest e-mail that rounds out the latest corporate tax news every morning.
Spain has promised that it and other European countries will continue with plans to introduce a minimum 15% tax in a groundbreaking way global pact led by the OECD, even if equivalent measures in the US fail.
In an interview with the Financial Times, Budget Minister María Jesús Montero said it was unacceptable that some groups in Spain pay up to 6 percent corporate tax, while smaller businesses pay 19 percent, adding that ‘you can not have regressive fiscal engineering ”.
As one of the first EU countries to introduce a ‘digital tax’ on companies such as Google, Spain has strengthened its status as a pioneer in stricter EU tax rules. The global agreement on a minimum corporate tax is also entering a decisive period, with participating countries meeting on Friday to clear details before G20 ministers and G20 leaders meet later this month.
With reference to July’s agreement by more than 130 countries, which have adopted the principle of a global minimum tax rate of 15 percent, Montero said: ‘It is unstoppable. . . Regardless of what is in the [US] Congress – which is hopefully going in the right direction – this debate is now over: Europe cannot withdraw from what we have all agreed on in the OECD. ”
US President Joe Biden is struggling to save his $ 3.5 tonne spending bill – a cornerstone of his legislative program that includes proposals for a new minimum effective corporate tax rate of 15 percent as well as major business tax increases. Biden does not have the support of two key senators for spending legislation.
Another possible bottleneck in Spain’s position is that, although any country can unilaterally implement the global minimum tax, the EU to act as a bloc requires unanimity from its 27 members. But Estonia, Hungary, Malta and, most importantly, Ireland have not yet endorsed the agreement.
However, since most multinational companies that pay low tax rates in Ireland are US businesses, the US Congress would lose the legislation if the US Congress approves it. tax benefit and is expected to agree, eliminating such a major obstacle to a final global agreement.
In Spain, Montero is in the final stages of negotiating with the government’s budget proposals for 2022. The radical left-wing Podemos group, the junior partner in the socialist-led coalition, is pushing for the 15 percent tax rate to be included in the country’s budget plans.
Montero, a socialist, said the tax measure would be included in the proposals to be supported by parliament by the end of the year — or that it would follow a report by an expert committee on fiscal reform next February.
But she warned that the international consensus could still be tested by ‘small print differences’, claiming the figures could be’ radically different ‘, depending on whether the 15 per cent is levied on companies’ taxable income or their reported profits , and if some sectors are released.
Other areas yet to be settled in the tax treaty include the dispute resolution mechanism and specific exemptions for countries that, although not tax havens, attract companies through various tax incentives, often for the manufacture of plants and machinery.
Montero said she was confident that Spain’s minority government would win parliament’s support for the budget, as it did for the first time last year. “It is important that the recovery is fair and that it reaches all our citizens,” she said.
The budget predicts that Spain’s fiscal deficit, which is expected to be 8.4 percent in 2021, will drop to 5 percent next year and to just over 3 percent by 2024. But critics of the left-wing government are skeptical that it will give up on the high spending habits of the pandemic era.