The European Union’s Directive which aims to establish a global minimum corporate income tax (CIT) of 15 per cent for multinational enterprise groups (MNEs) with more than 750 mln. euros in revenue (hereinafter the Directive) is a pivotal point in international taxation toward limiting crossborder competition.
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Adopted in December 2022 and swiftly implemented a year later, the Directive reflects the European Commission’s (the EC) proactive approach “to put an end to tax practices of MNEs that allow them to shift profits to jurisdictions where they are subject to no or very low taxation, the Organization for Economic Co-operation and Development (OECD) has further developed a set of international tax rules to ensure that MNEs pay a fair share of tax wherever they operate”.
In light of the EC’s call for rapid implementation of the Directive, a critical examination reveals inherent flaws in the adopted minimum CIT model that may undermine the European economy, its competitiveness, and value creation. These concerns relate to the current revenue threshold, ambiguity over the use of preferential CIT regimes, and legal uncertainty surrounding a rushed transposition of the Directive by some Member States and late implementation by others. The corporate income tax is known to have serious adverse effects on economic growth and wellbeing, which makes its harmonisation undesirable. The complexities and flaws implicit in the minimum CIT regime preclude its rapid and smooth implementation. These concerns relate to the current revenue threshold, ambiguity over the use of existing preferential CIT regimes, and legal uncertainty surrounding a rushed transposition of the Directive by some Member States and late implementation by others.
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