Analysts: Estonia's criticism of OECD minimum tax rules is reasonable

Estonia has been one of only three critics of the OECD's proposed minimum corporate income tax among the EU member states, but some analysts say this is reasonable as it has not been finalized yet.

Estonia, Poland and Hungary are the three states rejecting the policy and hindering the adoption of the global reform at the Council of Europe, which was discussed on Monday.

Several analysts believe Estonia's approach is reasonable, especially given the pace of reform.

"It's an unrealistic expectation and I do not expect there will be progress. My prediction is informed by what we saw in the past when we look at corporate tax-making rules or tax policy in general in the EU. The IT reforms, they have been graduate," ECIPE analyst Matthias Bauer told ERR.

Rebecca Christie, an analyst at the think tank Bruegel, said: "As long as the US has not implemented any part of the OECD deal any European country that wants to weigh in on the process, I think, has plenty of cover."

One of the reasons for Estonia's reluctance has been the incomplete nature of the reform. The OECD has agreed on a minimum tax and a digital tax together, known as pillars one and two, but only the first is currently being developed. 

That Estonia considers it important to introduce a digital tax has caught experts ERR spoke to by surprise.

"I would have guessed last year, that Estonia was in the group of countries that would rather have only pillar two [tax reform] and not pillar one [digital tax] because of Estonia's effort to make itself a real hub for global technology companies. So for me, it is a surprise to see Estonia supporting the first part of the tax on the tech companies," Christie said.

Estonian politicians do not want Estonia to put the breaks on global reform.

Minister of Finance Keit Pentus-Rosimannus (Reform) said as most of Estonia's proposals have been taken into account and "99 percent of companies are outside of the scope" of the reform there are no "major problems" with the current version.

"But there are really some issues that we still want to address, and I hope that we will reach an agreement on at least some of them before the directive is finalized," she said.

The OECD wants to introduce a 15 percent global minimum corporate tax rate for multinational enterprises with revenue above €750 million.

There is no corporate income tax on retained and reinvested profits in Estonia. The tax rate is between 14-20 percent on distributed profits.


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Editor: Helen Wright

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