European Commission plans EU business tax overhaul

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A planned reform of EU corporate taxation would substitute national business tax rules, EU Economy Commissioner Paolo Gentiloni said Monday.

The “Business in Europe Framework for Income Taxation,” or BEFIT, would “replace national corporate tax systems for the companies in scope, thus reducing compliance costs and barriers to cross-border investment,” he said at an EU tax event Monday.

It would draw on a global deal on a two-legged corporate tax that was agreed between more than 130 countries in 2021, and consists of the reallocation of taxable profits (known as Pillar One) and of a minimum corporate tax base of 15 percent (known as Pillar Two), the latter of which the EU is struggling to ratify due to subsequent vetoes first by Poland and now by Hungary.

But it would “go further,” Gentiloni said. It would have “the key features of a simplified common tax base and allocation of taxable profits between member states,” thus diminishing taxation policies within the bloc whereby countries seek to attract businesses by luring them with favorable tax regimes.

The reform is currently scheduled for the second quarter of 2023, according to the Commission’s own work program. A public consultation runs until January 26.

Taxation initiatives are always tricky as they require consent of all 27 EU countries.

Photo: EU Economy Commissioner Paolo Gentiloni. EC Audiovisual Service

Via POLITICO

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