Should the EU implement a minimum corporate taxation directive?

Abstract

The century old international tax system is in the middle of being rebuilt. Between the hope for a compromise and the fear of a tax war breaking out, this article inquires whether the EU should implement a minimum corporate taxation directive along the lines of the OECD GLOBE proposal. This question has legal and political dimensions. On the one hand, Art. 115 TFEU, which would be the basis for such a directive, demands an EU minimum taxation regime to promote the Internal Market. The article suggests that this may succeed. On the other hand, Art. 115 TFEU requires unanimity in the Council. Thus, and given the heterogeneity of Member States’ interests, additional tax policy reasons favouring such a directive are needed. Considering expectable reactions of taxpayers in a competitive environment and taking account of potential developments outside the EU, the author concludes that, overall, the implementation of an EU minimum taxation regime may – especially as a safeguard of origin based taxation – benefit the EU and all of its Member States. With the credible enforceability of minimum taxation rules being key, the author suggests EU action to establish minimum corporate taxation even if all EU Members States support the OECD proposal.

Keywords: tax law, EU, international tax competition, taxation regime, minimum taxation