Weekly Tax News – 8 November 2021

Mauritania joins the OECD Tax Deal

Mauritania joined on Thursday 4 November the OECD/G20 Inclusive Framework on BEPS as its 141st member and committed to addressing the tax challenges arising from the digitalisation of the economy by joining the two-pillar plan to reform the international taxation rules, bringing the total number of jurisdictions participating in the agreement to 137. Kenya, Nigeria, Pakistan and Sri Lanka are the last four members of the Inclusive Framework who have not yet joined the agreement.

Implementing the Global Tax Deal: all eyes on Washington

After leaders from the G20 countries endorsed last week the final agreement reached on October 8 between 136 countries at OECD level on the reform of international taxation, all eyes are now on Washington. The agreement is indeed only in principle and each country must now pass a separate legislation to implement it. Democrats – who have a thin majority in the US Congress - are reportedly hoping to use a special procedure, known as reconciliation, to pass the changes with a simple majority, rather than the usual requirement of 60 votes. In case of failure, it could threaten the agreement the US reached with France, Italy, Spain, Austria and the United Kingdom, who engaged to withdraw their national digital taxes once the global tax deal is in place.

EC to present a proposal implementing Pillar II on 22 December

According to a provisional agenda, the European Commission is planning to unveil its proposal on the implementation of the OECD global agreement on minimum effective taxation (Pillar II) on 22 December 2021. The Commission already announced in its Work Programme for next year that it will present in 2022 a proposal for a Directive implementing the OECD global agreement on re-allocation of taxing rights (Pillar I). On 22 December 2021, the Commission should also publish a proposal to fight the misuse of shell companies.

MEPs ask for an ambitious implementation of the global tax deal in the EU

Ahead of the French Presidency of the Council of the EU, 13 French MEPs from the Greens/EFA group in the European Parliament wrote to the French Finance Minister Bruno Le Maire on Thursday 4 November asking him to propose to the Member States to strengthen the ambition of the OECD/G20 agreement on a minimum tax at least for intra-EU situations. In their letter, MEPs suggest the EU should not apply the exemptions for the calculation of the minimum effective rate, it should lower the threshold from €750 million to €20 million in order to cover more companies and it should go beyond the 15% tax rate. They also ask the French Minister to publish the effective tax rate paid in 2020 of in-scope French based multinationals.

EU pushes carbon border tax at the COP26 in Glasgow

European Commission President Ursula von der Leyen said on November 2 at the UN climate change conference (COP26) in Glasgow that the EU supports international carbon pricing efforts, but that it will go ahead with its own initiative to tax emissions in EU imports. The EU is indeed moving to unilaterally tax imports of steel, iron, cement, aluminum, fertilizers and power based on their CO2 content, and priced according to the cost borne by EU installations under the EU’s Emissions Trading System. “We will, to avoid carbon leakage, now introduce slowly but surely a carbon border adjustment mechanism that says if you come with dirty products on our market, you have to pay a price as if you were in the Emissions Trading System of the European Union”, she said. “But we prefer you keep the money in your economy by putting a price on carbon in your economy”, Ursula von der Leyen added. The levy is currently being negotiated in the European Parliament and by EU Member States.