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EU Considers Tax on Large Companies for COVID-19 Recovery

Posted on June 2, 2020

A proposed EU tax on companies that benefit from the internal market could net €10 billion annually while representing only 0.2 percent of their EU operations, according to the European Commission.

The commission released more details June 1 about the proposed corporate tax that appeared in a May 27 proposal on funding sources for the €750 billion EU recovery package. Another €1.1 trillion is proposed for the EU’s long-term budget, and €540 billion will go toward coronavirus relief programs.

While the proposal is vague on the corporate tax’s timeline, it says the tax would be based on operations of “companies that draw huge benefits from the EU single market and will survive the crisis.”

EU Budget Commissioner Johannes Hahn told the Financial Times May 31 that 70,000 large companies with global annual turnover greater than €750 million could be affected by the single-market tax.

“Depending on the design [of the tax], whether a lump sum or a fee proportional to firms’ size, or a portion of a tax on profits, around €10 billion could be raised without excessively weighing on any individual firm,” a commission spokeswoman said . According to the commission, the revenue estimate comes from a “midpoint of possible structures, rates, and different categories of companies.”

The commission is in the early stages of discussing the proposed tax, and the details of the proposal still have to be specified, the spokeswoman said. Political agreement among the commission would be required to establish it as a new own resource. Because of that, the tax “would enter into force only once this crisis has passed,” she said.

The single-market tax is among several new taxes, including a carbon border adjustment tax, plastics levy, and digital services tax, being considered by the commission as means to pay off debt from borrowing to support the recovery package.

Meanwhile, support for a corporate minimum tax continues to grow. EU Tax Commissioner Paolo Gentiloni told members of the press May 29 that the EU would propose its own minimum corporate tax if the OECD and G-20 countries fail to reach a consensus on global minimum taxation by the end of 2020.

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