💰 Global Minimum Tax Under EU Scrutiny
The European Union is currently grappling with the legal and economic implications of the OECD’s 15% global minimum tax, a landmark initiative aimed at curbing tax avoidance by multinational corporations. At the heart of the debate is the Undertaxed Payment Rule (UTPR), which allows countries to impose additional taxes on subsidiaries of multinational groups if their parent companies are based in jurisdictions with low or no taxation.
⚖️ Legal Challenge in the EU
The European Court of Justice (ECJ) is reviewing whether the UTPR complies with EU law, following a referral from Belgium’s Constitutional Court.
Critics argue that the rule unfairly targets local entities for profits earned elsewhere, creating a disproportionate tax burden.
The ECJ’s decision could reshape how the EU implements international tax agreements and affect the broader OECD framework.
🇺🇸 U.S. Withdrawal and G7 Compromise
The United States, under former President Donald Trump, withdrew from the UTPR, citing concerns over its impact on American multinationals.
A G7 compromise was reached, exempting U.S.-based companies from certain provisions of the rule in exchange for dropping retaliatory tax measures.
This side-by-side system allows the U.S. to maintain its own minimum tax regime (GILTI) while coexisting with OECD rules.
🧮 Economic and Policy Impacts
The tax is designed to ensure that large corporations pay at least 15% effective tax in every country they operate.
Countries like Italy are preparing legislation to implement the tax, which will affect companies with revenues over €750 million.
The reform is expected to reduce profit shifting, increase transparency, and generate billions in additional tax revenue globally.
🏛️ Political and Business Reactions
Over 140 countries support the OECD’s initiative, but implementation remains uneven across the EU.
Some member states have missed deadlines or requested deferrals, creating uncertainty for businesses.
Multinational corporations are bracing for higher compliance costs, new reporting obligations, and potential restructuring of their tax strategies.
This legal showdown in Luxembourg could determine the future of international tax fairness and the EU’s role in global fiscal governance.