Legal disputes are posing a challenge to the EU’s stance on international taxation

Brussels is struggling to cope with opposition from three EU countries that have been opposed last week international cooperation re-enacting corporate tax laws, with Hungary and Estonia claiming that the request could violate EU law.

The EU needs to be assisted in collaboration with member states before agreeing to rewrite the international tax laws that the OECD agreed last week. But Ireland, Hungary and Estonia have so far refused to sign an international treaty, creating an internal conflict between the EU and major powers.

The program of main points but not argumentative ones revolves around the 15% tax required by the OECD.

Ireland has “committed itself to the cause” and seeks to achieve results that Dublin can contribute to but has expressed doubts about the prospect of at least 15% of global taxes. Hungary also said lower prices could “impede economic growth”.

In addition, Hungary and Estonia have stated that the request violates EU law because it requires countries where large corporations use lower taxes in lower tax states.

He further added that the lower order could invalidate the 2006 European Court of Justice’s decision to ban Cadbury Schweppes.

The ruling stated that the establishment of multinational corporations in low taxes does not mean tax evasion.

“The ECJ’s ruling on Cadbury Schweppes makes it clear that these laws should not be enforced in accordance with current laws,” said Helen Pahapill, deputy attorney general for Estonia.

Opponents in the EU have set up protests between small and large countries – all of which must accept the OECD idea to become EU law.

The OECD agreement is made up of two main components: a minimum 15% foreign utility tax, called column 2; and pillar 1, which can also share the profits that 100 major companies make in the governments where they sell.

“Small EU countries have asked questions about the legality of the 2nd pillar in EU legislation,” Pahapill added.

The EU wants to achieve what remains in the coming months, before October.

Daniel Gutmann, a colleague of law firm CMS Lefebvre, said Brussels should offer its views in a manner consistent with EU principles on business rights.

“If there are any restrictions on this point, the questions that the council should be answering are whether they are appropriate,” he said.

However, officials close to the talks said the introduction of international taxation was in consultation with the legal department of the European Commission and was confident that it was in line with EU law.

Poland also raised doubts about lower taxes, saying this would undermine economic growth. But Warsaw last week supported the OECD agreement.

Tadeusz Koscinski, Poland’s finance minister, told the Financial Times that his country had decided to reinstate the agreement after creating a sculpture of a major project, which was not already in the negotiations.

“We must have weapons [to incentivise business to locate in Poland] and one of that is our property taxes, ”he said.

“I do not want companies from France or Germany coming to Poland to resell in France and Germany and transfer profits to Poland,” Koscinski added. “But I am for those who are coming to Poland to help us develop our marketing skills in the local and third world markets. It should be counted on the international tax code. ”

Although this same obstacle has now been overcome, especially in Poland, another problem is the planned e-tax in Europe for electricity.

Criticized by Washington, particularly in the face of major US companies, Brussels is expected to publish its views by the end of this month.

EU leaders instructed the committee last July to make the money, some of which is used to repay loans obtained under the EU’s 800bn Next Generation EU system.

The European Parliament is keen to see the adoption of new contributions to the agency, such as the digital tax.

Previous attempts by the EU on technical taxes instituted in 2019, but the idea was revived when Trump’s administration blocked sanctions on other countries.

The commission said the new funds would be used for hundreds of companies, many of them in Europe, and would support global taxes, rather than fighting them.

But the EU is facing pressure from the US to delay the idea, considering that the international tax agreement is aimed at increasing global taxes. Washington said in a recent newspaper sent to EU spies that the idea that taxes are now in danger of “completely disrupting” the tax negotiations, is due to the soundness of the issue.

Pascal Saint-Amans, OECD’s chief tax officer, said: “There is a lot of dialogue in the negotiations and we hope that all countries will agree to the agreement by the end.”

Additional reports of Laura Noonan and Marton Dunai