The Confederation of Swedish Enterprise urges the Swedish Government not to agree to the Directive until the OECD work on the GloBe Rules is completed, major trading partners are implementing the same agreed rules, and the finalized OECD rules have been transposed into the text of the Directive.
The Confederation of Swedish Enterprise has submitted a consultation response regarding the European Commission’s proposal for a directive on a minimum tax of 15% in the EU for all companies with a global turnover exceeding EUR 750 million.
In the autumn of 2021, 136 of the 140 countries participating in the OECD/Inclusive Framework (IF) negotiations agreed on a plan for partial re-allocation of taxing rights towards market jurisdiction (Pillar 1), and the introduction of a global minimum tax (Pillar 2). The Commission now plans to implement Pillar 2 in the EU.
From a principal point of view, the Confederation of Swedish Enterprise is not in favor of introducing a global minimum tax. We believe that it constitutes a serious blow to the principle of tax sovereignty since it undermines the possibility of a country to design its tax system in accordance with its economic policies and priorities. This is not in the interest of a small export-oriented country like Sweden. In addition, a global minimum tax will significantly increase the administrative burden for many Swedish companies, even though they already pay taxes at a rate above the proposed minimum level.
However, we do recognize the immense international political pressure for an international tax reform related to the digitalization of the economy. All businesses are becoming digitalized making this a truly global issue requiring a global solution. On these grounds, the Confederation of Swedish Enterprise welcomes the efforts made by the OECD, resulting in a tax package consisting of a two-pillar based agreement to reform international taxation rules.
We are of the opinion that pillar 1 and 2 of the OECD/IF agreement must be treated as an integrated package to be implemented in a concerted way at a global level. If both pillars are not implemented by the US and other major trading partners at the same time as in the EU, European, and consequently Swedish, businesses could be at a competitive disadvantage. It is thus important that the Swedish government and the EU monitor what is happening in the rest of the world before rushing ahead with the EU-implementation.
We support the Commissions intention to make the Directive on a global minimum tax fully in line with the OECD Model Rules. The rules are extremely complex and there must be no discrepancies between the two regulatory frameworks, resulting in parallel systems. The OECD is still working on finalizing the details and will present an Explanatory Commentary in February 2022 and a detailed Implementation Framework on administration, compliance, and safe harbor rules by the end of 2022.
The Commentary and Implementation Framework are expected to include clarifications and simplifications essential for the new system to function in a manageable way. The Confederation of Swedish Enterprise believes that it is of utmost importance that the final version of the OECD Model Rules is transposed into the Directive.
This, however, is not feasible if the EU rushes the implementation ahead of the OECD rules being fully finalized. For these reasons, the Confederation of Swedish Enterprise strongly objects to and questions the Commission’s intention to finalize the Directive during the spring 2022 in order to have the GloBe Model Rules operational and applicable from 1 January 2023.
The Confederation of Swedish Enterprise believes that sufficient time must be given for the OECD to conclude its work before Member States should agree on a final text in the Directive. If not, we could end up in a situation where a newly signed Directive, national legislation and business systems must be amended shortly after they have been put in place. This would not only be time-consuming but also costly for businesses. In addition, amending the Directive may prove to be politically difficult if some countries find it against their interest.
The Confederation of Swedish Enterprise believes that the number of specific comments pointed out in our opinion, relating to the need for amendments and clarifications of the rules, show the importance of not having the Directive signed before the OECD work on the Model Rules is completed and the outcome has been fully incorporated into the Directive.
The Confederation of Swedish Enterprise urges the Swedish Government not to agree to the Directive until the OECD work on the GloBe Rules is completed, major trading partners are implementing the same agreed rules, and the finalized OECD rules have been transposed into the text of the Directive.