âLong-debated proposals for reforming the digital global economy have started to take shape at the OECD. As often happens, the initially simple plan to give countries consuming the services of digital giants the right to tax them has been replaced by several new ones The link between these new solutions and the original idea has become quite muddy in places â, said Pentus-Rosimannus.
âFirst, the taxation of the digital economy which was originally intended to concern GAFA (Google, Apple, Facebook and Amazon) has become a proposal to tax the profits of the 100 largest global groups, whether digital or traditional, with a complicated resolution and calculation mechanism. , explained the minister.
Pentus-Rosimannus said the currently proposed scheme would bring Estonia additional tax revenue of 10 million euros, while the entire EU would earn 1 billion euros per year.
Another change would concern an overall minimum income tax. âTo put it bluntly, the purpose of the proposal is to limit tax competition and tax policy choices between different countries. When has restraining competition ever been a good thing? I can’t think of one one long-term example. Such a limitation would clearly be binding on small countries, and while healthy tax competition generally supports growth and innovation, this proposal goes in the opposite direction. Convenient for whales but bad for the world. business, international competition and job creation, âwrote Pentus-Rosimannus.
She added that the comprehensive corporate tax solution would mainly concern groups that have Estonian subsidiaries whose overall turnover exceeds 750 million euros per year. âWe could have 200 to 300 of these companies. The proposed solution is extremely complicated at the moment, while it is even more difficult to see how such a regime could benefit the economy in general. Head offices subject to the minimum tax rate would only be number one or two in Estonia, ânoted the Minister of Finance.
Pentus-Rosimannus pointed out that Estonia has requested an exception for its corporate tax system in recent years. “Few countries have been thrilled with this prospect. We have stepped up our negotiating efforts in recent weeks.”
“We have to keep in mind that the OECD is not a legislative body, which means that even if the current proposals are adopted, nothing will automatically change. However, things will get complicated on the international scene”, she concluded.
G7 leaders agreed on Saturday on a 15% global corporate tax. If the deal is signed at the G20 meeting in July, Estonia will have to apply for a waiver allowing it to postpone revenue collection for several years. Estonia only taxes profits when they are paid, which companies might not do every year.