Which objective(s) does the Commission pursue?

The agreement that has just been reached internationally is historic. By providing for a global minimum effective tax rate (Pillar 2) as well as a re-allocation of taxing rights to market jurisdictions (Pillar 1), it will make the global tax system fairer. As regard Pillar 1, the OECD will prepare a multilateral convention (MLC) under public international law for all jurisdictions to sign by mid-2023 and to ratify. In addition the OECD is working on a model national legislation, that participating jurisdictions, including EU Member States, may use to transpose the Pillar 1 agreement in national law as far as changes to domestic law are required. This is an important step and work needs to continue to meet the ambitious implementation timetable so that the mechanism could enter into force in 2024. Swift implementation is a must to deliver on the citizens expectations. A Commission proposal will facilitate this.

The initiative aims at ensuring a fair and consistent functioning of the internal market, while safeguarding Member States’ and EU revenues by ensuring a consistent and comprehensive implementation of Pillar 1 at EU level.

Increase benefits of an EU regulatory framework and reduce associated regulatory costs: benefits of a level playing, fairer competition and of standardisation, by ensuring that all EU Member States implement the global agreement in the same way, even if they are not a member of the OECD.

An EU regulatory intervention will lead to gains in efficiency for tax administrations due to a common approach to implementing a global agreement at EU level.

Furthermore, the Commission proposed an own resource equivalent to 15% of the share of the residual profits of the largest and most profitable multinational enterprises that are reallocated to EU Member States under the agreement on a reform of the international tax framework (Pillar 1). Under the Commission’s own resources proposal, Member States would provide a national contribution to the EU budget based on the share of the taxable profits of multinational enterprises re-allocated to each Member State under Pillar 1.

Estimated savings and benefits

The Commission proposal will bring about savings due to a common EU approach of implementing a global agreement and benefits regarding consistent implementation by all EU Member States including consequential changes to existing national legal frameworks. Estimations and quantification of those effects have not been measured due to the fact that a number of technical features are still under consideration. An EU initiative will not cause substantial additional cost since all but one EU Member States are already committed to implement the global agreement.

Pending the finalisation of the agreement, revenues for the EU budget could amount to up to EUR 2.5-4 billion per year. A more precise number cannot be identified at this time given that the discussions on certain technical implementing details of the Pillar 1 agreement are still ongoing. The range provided is based on a series of broad assumptions and cannot be further qualified also due to data limitation issues as regards the potential companies that may ultimately contribute to the reallocation of taxing rights under the agreement.