The European Union (EU) is taking a significant step towards fairer global taxation, as member states recently reached an agreement in principle to implement the minimum taxation component of the Organisation for Economic Co-operation and Development’s (OECD) international taxation reform. Known as Pillar 2, this agreement aims to prevent a race to the bottom in corporate tax rates and ensure that large multinational and domestic groups pay a minimum rate of 15% on their profits.
The ambassadors of EU member states agreed to advise the Council to adopt the Pillar 2 directive, and a written procedure for the formal adoption will be launched. This marks a crucial step towards greater tax fairness and transparency, particularly in light of recent revelations about multinational corporations paying little to no taxes despite generating massive profits.
The new rules will apply to companies with a combined annual turnover of at least €750 million. Under the directive, the largest multinational groups will be required to pay the agreed global minimum rate of corporate tax, reducing the risk of tax base erosion and profit shifting. This means that corporations will no longer be able to avoid paying taxes by shifting profits to low-tax jurisdictions or engaging in other tax-avoidance tactics.
Zbyněk Stanjura, Minister for Finance of Czechia noticed, that he is very pleased to announce that we agreed to adopt the directive on the Pillar 2 proposal today. Our message is clear: The largest groups of corporations, multinational or domestic, will need to pay a corporate tax that cannot be lower than 15%, globally.
