136 countries, including Poland, have agreed on changes to the international tax system. As the Polish Ministry of Finance explained on Friday, this is to be the basis for the creation of legal regulations regarding the taxation of digital giants and the next step in the fight against tax havens. The agreement on Friday stipulates that large corporations will be subject to a minimum tax rate of 15 percent from 2023.
“Breakthrough” – as it was defined in the OECD communication – the agreement covers 136 countries and jurisdictions, which together account for 90 percent. Global Gross Domestic Product. “Today we took another important step towards greater tax justice,” said German Finance Minister Olaf Scholz in a statement quoted by Reuters.
– Negotiations at the OECD forum were demanding, but we are still working and we want to jointly create a new tax reality in the world – said the head of the ministry, Tadeusz Kościński, quoted in Friday’s communiqué of the Ministry of Finance.
As Deputy Finance Minister Jan Sarnowski assessed, “participation in today’s compromise is an important step towards combating unfair tax competition”. – We have been campaigning against tax havens since 2016. Today’s political declaration will be translated into the language of actual regulations in the course of work in the EU field carried out in the first half of 2022 – added the deputy minister.
In the statement of the Ministry of Finance it was stated that the statement is the result of negotiations that had been underway since July this year. It was then that 130 countries, including Poland, as part of the work at the forum of the Organization for Economic Cooperation and Development (OECD), issued the first joint declaration of willingness to work on the reform of international taxation and adaptation of international taxation rules to the challenges of the digital economy.
– These principles will be based on two pillars. Pillar I covers the taxation of around 100 of the largest companies that, taking advantage of the progress of globalization and digitization, sell goods and provide services around the world. These are not only companies that provide us with digital content, but also the largest companies selling services and goods via the Internet as well as traditionally. Pillar II, on the other hand, provides for the introduction of a minimum global tax of 15%. effective rate – explained Deputy Minister Sarnowski.
“An important step towards combating unfair tax competition”
The deputy minister assessed that participation in the Friday compromise is “an important step towards combating unfair tax competition”.
– We have been campaigning against tax havens since 2016. The compromise reached will not affect the attractiveness of Poland as a place to invest. Today’s political declaration will be translated into the language of actual regulations in the course of work in the EU field carried out in the first half of 2022 – added Sarnowski.
The Ministry of Finance assessed that the most important aspect for Poland in the OECD international arena is “to maintain competitiveness by excluding companies that conduct real economic activity from taxation with the minimum global tax, the so-called substance-based carve-out”.
– At the very beginning of the negotiations, we made it clear that we wanted to attract investors to Poland who would create jobs in our country. And in fact, we managed to win a protection mechanism, thanks to which the taxation of foreign companies that invest in Poland will not be increased, stressed Deputy Minister Sarnowski.
Statement in the version from July this year. included a substance-based carve-out proposal in the form of an exclusion of at least 7.5 percent. during the transition period of 5 years, and after this period at least 5%. asset values and wages. The proposal to introduce a transitional period was then an idea of Poland. As a result of further intensive talks and negotiations, it was possible to increase the ratio of the value of assets to 8%. and wages up to 10%, as well as increasing the transition period to 10 years with a reduction mechanism.
– From the beginning, we assumed that such a tax must hit the so-called tax havens, i.e. countries applying unfair tax competition. Poland is not such a country. Hence, the global tax should not lead to an increase in taxation of foreign companies that invest in Poland and conduct real economic activity here. We said it loud and clear. It was our condition to start further work on the global taxation project – emphasized Minister of Finance Tadeusz Kościński.
Tax avoidance losses
The Ministry of Finance reminded that, according to OECD research, global losses related to corporate income tax avoidance range from 4 percent. up to 10 percent worldwide revenues from this tax, i.e. between 100 and 240 billion dollars a year. He added that according to the report “The Missing Profits of Nations” published in January, as much as 40 percent. the profits of multinational corporations – $ 700 billion – go to tax havens every year.
– Profit transfer by large corporations, often with the help of tax havens located in the European Union, takes place at the expense of other countries, which thus lose tax revenues. Countries that do not apply unfair tax competition, including Germany, France, Italy, Hungary or just Poland – said Deputy Minister Sarnowski.
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