European Council must listen to Parliament's call for a slightly better EU minimum tax

Published: 19th May 2022

Today, the European Parliament voted through a non-binding report on the European Commission’s proposal to implement the deal on a global minimum tax at the EU level. EU Finance Ministers are expected to vote on a final agreement next Tuesday, 24 May. 

In response, Chiara Putaturo, Oxfam EU Tax expert, said:

“The European Parliament’s plan for an EU minimum tax is a step in what should be a leap forward. Small improvements introduce a sliver of flexibility in a proposal that risks setting in stone a European tax system low in ambition for years to come. 

“The report keeps the minimum tax rate low at 15 percent and makes no change to the several exemptions which companies can use as loopholes to continue to dodge paying their fair share of tax. Yet, the report nudges the door open for a more ambitious tax regime as it allows EU countries to set alternative forms of minimum taxation domestically and the EU to review the text in five years, hopefully improving it. The report also contains concrete steps which make it more difficult for companies to adopt fictitious arrangements to escape paying the minimum tax.

“Up until now, EU tax havens like Ireland and Malta have done their best to water down the minimum tax. While peoples’ pockets are hit hard with living costs skyrocketing, big companies are raking in record profits. 

“EU leaders cannot stand idly by and allow tax aggressive countries to, once again, decide the terms of the deal. At next week’s meeting, EU finance ministers must not brush aside the European Parliament’s opinion in favour of a tax regime which works for EU tax havens.”  

Notes to editors

Today’s European Parliament’s report follows the European Commission’s proposal tabled in December 2021. Oxfam criticised the lack of ambition of the European Commission’s proposal. The Council failed to reach an agreement on the EU minimum tax in March and April and will vote again on the file in the meeting of EU finance ministers on the 24 May. The European Parliament’s report is not binding.    

Oxfam supports the idea of adopting a global minimum tax. But it considers the design agreed at the OECD and replicated by the EU to be biased against the interest of low-income countries and the effective tax rate of 15 percent to be far too low to end tax competition. Moreover, the OECD agreement and the EU’s proposal include a so-called ‘substance carve-out’. This allows companies to pay a lower tax rate than 15 percent in countries where they have a high number of employees or tangible assets such as factories and machinery. The EU Tax Observatory estimated that this exemption reduces revenues for EU countries by 23 percent in the first 10 years and by 14 percent thereafter.

Malta was among the most reticent EU countries in the EU’s negotiations. Ireland, whose main corporate tax rate is 12.5 percent, has strongly advocated at the OECD level to keep the minimum tax rate not higher than 15 percent. The European Commission identified risks of aggressive tax planning in Malta and Ireland (together with Cyprus, Hungary, Luxembourg and The Netherlands). 

In December, Oxfam published a manifesto with recommendations on tax rules to the French Presidency. Oxfam also recommends the inclusion of a review clause, anti-avoidance rules, more delegated powers to the Commission and a compatibility clause with Controlled Foreign Company rules and alternative domestic minimum taxation. These provisions were included in the European Parliament’s report. 

In April 2022, Oxfam published a new report, “First Crisis, Then Catastrophe”, warning that over a quarter of a billion more people could crash into extreme levels of poverty in 2022 because of COVID-19, rising global inequality and the shock of food price rises supercharged by the war in Ukraine. At the same time, the value of the 1,200 largest companies in the world has increased by 56 percent since the beginning of 2019 and US corporates have made record profits of 37 percent while paying a smaller share of federal tax revenue. 

Contact information

Jade Tenwick | Brussels, Belgium | | mobile +32 473 56 22 60

For updates, please follow @NewsFromOxfam and @OxfamEU 

Please support Oxfam's Coronavirus Response Appeal.