EU delays digital levy to focus on global minimum tax agreement

The EU has decided to postpone its digital levy until the autumn after a two-day meeting of G20 finance ministers in Venice, where a historic agreement was reached on building a more stable and fairer international tax architecture, writes Catherine Feore. 

Much of the renewed impetus for progress in this area has come from the new Biden administration. Today (12 July) the US Secretary of State for the Treasury Janet Yellen (pictured) met with the president and executive vice president of the European Commission for the economy, as well as with Economy Commissioner Paolo Gentiloni and European Central Bank President Christine Lagarde, before participating in today’s Eurogroup meeting of finance ministers. 

The new proposal will build on the ‘base erosion and profit shifting’ (BEPS) work of the OECD and address the two components of this work, namely the allocation of profits of multinational companies (MNEs) and an effective global minimum corporate tax rate. The US initially suggested that a minimum corporate tax rate should be set at 21%, but swiftly moved to 15%. 

Going into today’s Eurogroup meeting, Economy Commissioner Paolo Gentiloni said he had had an excellent meeting with the US Secretary of the Treasury Janet Yellen. Gentiloni said the main achievement of the weekend - the global agreement on taxation - would put an end to the “race to the bottom” to relocate taxes. He said: “In this framework, I informed Secretary Yellen of our decision to put on hold the proposal of an EU digital levy to allow us to concentrate on the last mile of this historic agreement.”

The European Commission’s spokesperson Daniel Ferrie said that the Commission would have to swiftly address the outstanding issues and finalize “various design elements”, together with a detailed implementation plan by October. The idea is that this would be approved by G20 heads of government at a summit in Rome. Ferrie said: “For this reason we have decided to put on hold our work on a proposal for a digital levy as a new ‘own resource’ during this period.”

The European Commission had tabled an announcement on a new EU digital levy for 14 July, then delayed to 22 July, it has now been delayed until after this agreement. The digital levy was envisaged as a new own resource which would help the EU in the repayment of the NextGenerationEU borrowing. New own resources need to be put in place by 1 January 2023.

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