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EU And G7 Push Ahead With Anti-Avoidance Initiatives

Kitty Miv, Editor
10 June, 2021

Discussion of international anti-avoidance campaigns has continued unabated this week, prominently in the European Union, which recently announced the launch of the European Tax Observatory, a new research laboratory which aims to assist in the fight against tax abuse.

The Tax Observatory will support EU policymaking through research, analysis, and data-sharing, to deepen the research on tax avoidance, tax evasion, and aggressive tax planning, and to advise EU policymakers accordingly.

The Observatory was among the initiatives announced in the Commission's July 2020 Tax Package, and the Observatory's research will complement the Commission's reflection process on the future of taxation in the EU, which will conclude in a Tax Symposium on the "EU tax mix on the road to 2050" in 2022.

The headline development this week, though, was the support voiced by finance ministers from the G7 countries for the US-backed global minimum corporate tax proposals that have been under discussion recently.

Meeting on June 5, the G7 finance ministers agreed that the new international tax architecture being discussed to resolve the tax challenges of the digitalized economy should include a minimum corporate tax burden for multinationals of no less than 15 percent.

During two-day talks in London, the finance ministers from the United States, Japan, Germany, Britain, France, Italy, and Canada agreed in principle to a global minimum rate of 15 percent, applied on a per-country basis.

According to a statement issued by the UK Government after the meeting, the ministers further voiced support for OECD proposals on international tax reform, agreeing "the principles of an ambitious two Pillar global solution to tackle the tax challenges arising from an increasingly globalised and digital global economy."

The OECD released its proposals for reform of international tax rules in October last year. Under pillar one of its proposals, new rules will be established on where tax should be paid ("nexus" rules) and there will be a fundamentally new way of sharing taxing rights between countries. The aim of the pillar one proposals is to ensure that digitally intensive or consumer-facing Multinational Enterprises (MNEs) pay taxes where they conduct sustained and significant business, even when they do not have a physical presence there. The second pillar would introduce a global minimum tax, which the OECD considers would help countries around the world to address remaining issues linked to base erosion and profit shifting by MNEs.

A communique issued by the G7 after the meeting reads: "We strongly support the efforts underway through the G20/OECD Inclusive Framework to address the tax challenges arising from globalisation and the digitalisation of the economy and to adopt a global minimum tax."

The G20 is aiming to reach an agreement on international tax reform at its next meeting, in Venice, Italy, which is scheduled to take place on July 9-10, 2021.

Until next week!


About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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