Directive on ensuring a minimum level of taxation for multinational groups within the European Union (‘Pillar Two’) - a BusinessEurope position paper

Key messages

• We welcome the global agreement reached at the OECD/Inclusive Framework (IF) on a global corporate tax reform. Provided that they are implemented globally and in a harmonised way, both ‘Pillar One’, regarding the reallocation of taxing rights and ‘Pillar Two’, introducing a global minimum effective corporate tax, have the potential to provide stability and coherence to the international corporate tax system. We strongly urge EU Member States to incorporate the detailed technical rules, concerning the implementation and administration of the minimum tax, which will be agreed at the OECD in the following months, into the EU directive.
• A priority in the implementation of the EU directive should be the protection of European competitiveness. While the current proposal aligns closely with the key elements of the OECD/IF agreement, any EU directive in this area must continue to avoid a ‘gold-plated’ approach, as it would risk putting European companies at a competitive disadvantage and cause double taxation.
• Similarly, the OECD/IF agreement must not end up as an ‘EU only’ agreement, with the United States not implementing either (or both) Pillar One or Pillar Two a particular risk. If major trading partners of the EU do not join the global minimum tax in full, then this raises critical questions in particular about the feasibility, effectiveness and fairness of the minimum tax at EU level and increases the risk of legal uncertainty and double taxation. The EU must ensure that implementationr of the Pillar Two directive limits as much as possible the danger of European companies being put at a competitive disadvantage. This will require in particular more safeguards to ensure that the ‘backstop’ mechanism - the Undertaxed Payments Rule (UTPR) - works efficiently.