EU adopts historic plan for minimum 15 percent tax on multinationals

The European Union has adopted a plan for a global minimum 15 percent tax on multinational businesses, after leaders gave final approval following months of wrangling. France welcomed a decision that has been years in the making.

The European Union on Thursday adopted a plan for a global minimum 15 percent tax on multinational businesses, after leaders gave final approval following months of wrangling. REUTERS/Kacper Pempel/Illustration

The landmark agreement between nearly 140 countries is intended to stop governments racing to cut taxes to lure the world's richest firms to their territory.

"Today the European Union has taken a crucial step towards tax fairness and social justice," EU economy commissioner Paolo Gentiloni said.

"Minimum taxation is key to addressing the challenges a globalised economy creates."

The plan was drawn up under the guidance of the Organisation for Economic Cooperation and Development (OECD) and already had the backing of Washington and several major EU economies.

But the implementation of the minimum tax in the 27-nation European Union has already been delayed as member states raised objections or adopted blocking tactics.

Most recently, this week Poland blocked formal adoption of the measure while arguing about unrelated measures, such as sanctions on Russia.

But at Thursday's summit such reticences were negotiated away, and the tax will now come into effect across the block from 31 December 2023.

Leaders hail the decision

Germany's Chancellor Olaf Scholz said it was a "project close to my heart" and France's President Emmanuel Macron said France had been pushing the idea for more than four years.

"It's a major step forward for all those who believe in tax justice like we do," Macron said.

"This is a major and historic achievement”, government spokesman Gabriel Attal told France Info on Friday.

• France among 130 countries to back deal on global minimum tax for companies

"For several years, we have said that there should be a minimum tax of 15 percent across the board(…) We brought this forward firstly at the OECD level, for which we obtained an agreement in 2021. Then we needed an agreement at the European level".

The global minimum tax is only one part, known as Pillar Two, of the OECD agreement.

The first pillar, which provides for the taxation of companies where they make their profits to limit tax evasion, primarily targets digital giants.

It requires an international agreement which is not yet finalised.

(with wires)