EU to introduce a global minimum tax for multinational companies

EU to introduce a global minimum tax for multinational companies
Finance Minister Vincent Van Peteghem. Credit: Belga / Eric Lalmand

Following months of intensive negotiations, EU Member States have reached an agreement on the introduction of a global minimum tax for multinational companies, announced Belgian Finance Minister Vincent Van Peteghem on Tuesday.

For months, Van Peteghem has been involved in the negotiations, always advocating for a 'package approach' to force a breakthrough on various fronts. It appears the minister's efforts have been a success because, in addition to the minimum tax, an agreement was also reached over more financial support for Ukraine as well as the Hungarian recovery plan and the application of the European rule of law mechanism.

"It was important that progress was made on the international minimum tax file. My proposal to overturn the Hungarian veto through a package approach proved successful," he said. "Finally, because we had already taken major steps and the FPS Finance has been ready to transpose the rules into Belgian law for some time."

Van Peteghem called the agreement an "important step towards greater fiscal justice." In practice, the deal will turn the October 2021 OECD/G20 agreement into a European directive – a necessary step in the global minimum tax, known as 'Pillar 2'.

Lever in the fight against tax havens

The next step is the transposition into Belgian law so that this minimum tax can come into force from 2024. At Van Peteghem's request, the Federal Public Service Finance has already prepared and is ready to implement this transposition quickly and correctly.

This international minimum tax will mean that regardless of the country where a company is headquartered, it will be subject to the 15% minimum tax. "This is the lever in the fight against tax havens," said Van Peteghem's cabinet. "If companies in Belgium provide economic activity and sell services to our consumers, they must also make their honest contribution."

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Additionally, an agreement was also reached on Monday evening on financial aid to Ukraine necessary to keep the Ukrainian Government running and to provide sufficient liquidity support. The Hungarian recovery plan was also approved.

However, Van Peteghem emphasised that Hungary will have to "strictly implement reforms to its rule of law" before it will start receiving "even one euro." In that context, an agreement was also reached on the application of the rule of law mechanism.

It will also be possible to withhold European funds on the basis of non-compliance with rule of law principles – which Van Peteghem called "a very important incentive" to continue to comply.

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