BRUSSELS — The European Commission is exploring whether to use revenue from a global tax agreement on multinational companies to finance the EU’s next seven-year budget, four EU diplomats with knowledge of the proceedings told POLITICO. The idea could facilitate an agreement on new EU-wide taxes, known as own resources, which has emerged as a major stumbling bloc in the ongoing budget negotiations. The European Council President António Costa has urged countries to approve the new taxes to reduce national contributions to the bloc's budget, which is worth €1.82 trillion according to the latest proposal from earlier this month.
Costa, who is brokering budget talks, is pressuring leaders to reach a budget deal among themselves by the end of the year — before elections in Poland, France and Italy threaten to derail the negotiations. Yet after more than a year of haggling, EU governments are still at odds over five proposed new taxes that the Commission estimates would generate €65 billion per year. Among the options on the table, a corporate tax known as CORE — which charges a lump sum on companies’ revenues exceeding €100 million — has emerged as the most unpopular option and is particularly toxic in Germany.
To break the deadlock, French President Emmanuel Macron supported funneling part of the tax on multinationals to the EU budget during a leaders’ summit in October, said two of the diplomats. They were granted anonymity, like others, to discuss the sensitive plans. Supporters argue that this idea could garner more political support than CORE as it targets companies’ profits as opposed to their revenue.
CORE is not about that, CORE is about taking a toll blindly,” said Pascal Saint-Amans, a former OECD official and one of the architects of the global tax arrangement. Under the OECD tax deal from 2021, EU countries are compelled to levy a 15 percent minimum corporate tax on large multinationals with an annual turnover exceeding €750 million. Controversially, the U.S. secured an exemption from the rules as it introduced a national tax arrangement that was deemed equivalent to the OECD framework.
The end goal is to prevent countries from competing to offer lower and lower corporate tax rates to attract large multinationals. Historically, many foreign multinationals operating across the EU such as Apple and Google have set their headquarters in Ireland because of its low taxes and light-touch regulation. To tackle this phenomenon, the OECD deal compels countries undercutting the 15 percent rate to levy a “top-up tax” on large foreign companies.
Currently, the revenue is collected by national governments. However, European capitals could funnel part of these proceeds to the bloc’s budget, the diplomats said. This could hit countries such as Ireland and the Netherlands which charge low corporate rates and collecting large sums from the top-up tax.
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