The minimum tax is based on international agreements at the OECD level, and negotiations are currently ongoing to amend the framework. The main proposed change concerns the exclusion of large multinational groups headquartered in the United States from the OECD minimum tax system. The reason is that the U.S. operates its own minimum tax regime, and U.S. companies should not be subject to two systems simultaneously.
In addition, the OECD is discussing a simplification for calculating the effective tax rate, which unfortunately does not provide the expected relief, as well as rules enabling a more favorable treatment of tax incentives. Constantly changing and increasingly complex rules significantly increase the administrative burden and compliance costs, which are particularly burdensome for smaller countries, since the tax does not generate the level of revenue initially forecasted.
In the European Union, the implementation of the minimum tax is mandatory for all Member States. This places EU companies at a disadvantage compared with businesses in the rest of the world, as outside the EU the introduction of the minimum tax is voluntary. A compulsory minimum tax undoubtedly influences investment decisions and restricts international business activities, thereby undermining the EU’s competitiveness.
Estonia considers that the planned changes must be thoroughly assessed at the OECD level and, once an agreement is reached within the OECD, the necessity of the EU directive must be reviewed to ensure that the competitiveness of EU Member States’ economies is not harmed.
The implementation of the minimum tax directive should also be voluntary for EU Member States, or smaller Member States should be given the option not to apply the minimum tax rules. Estonia is ready to contribute to finding solutions that strike a balance between competitiveness, tax revenue, and administrative burden for EU Member States.
Finance Minister Jürgen Ligi’s letter with the same message to the President of the European Commission, Ursula von der Leyen, and to the Commissioner for Taxation and Climate Action, Wopke Hoekstra, can be read here.
