An extension in the drafting of the Minimum Tax Directive is needed
With regard to the Minimum Tax Directive, The European Commission requested comments for the minimum taxation directive it published in December 2021. The Technology Industries of Finland (TIF) agrees that minimizing tax evasion and avoidance and combating harmful tax competition are important goals. Global, EU-level and national minimum tax regulations must be as consistent as possible. Otherwise, the risk of breaching interpretations by member states, double taxation and tax disputes is high.
The biggest challenge in preparing the Minimum Tax Directive is the tight schedule. The preparation schedule should be extended by at least one year to allow for consistency. The OECD will continue its work for 2022 providing much needed clarification and simplification to the minimum taxation rules. All the differences between the Directive and Model Rules will only be visible when the OECD’s work is ready.
One important question discussed in the OECD at the moment are R&D tax incentives and whether they should be excluded from the ETR calculation. Without huge R&D-investments we will not be able to reach the agreed carbon neutral targets. This question should be analysed and discussed also in the EU, before the Directive text is agreed. Even though the Compromise Proposal gave a much needed extension to the transposition schedule until 31 December 2023, there should be an additional one year before agreeing on the Directive text. Deciding based on the situation on December 2021, is premature.
Thus, TIF hopes that the Directive text would be amended to comply with the OECD Model Rules, Commentary and Implementation framework and agreed Q1/2023. In addition, companies and tax authorities need time to manage the technical changes required, after the Directive is agreed and comes into force. TIF suggests that the Directive would be applied for fiscal years beginning from 1 January 2025.