The European Union’s (EU) European Commission (EC) is instituting a new business tax to benefit the Post-Pandemic Recovery Fund, U.S. News reported on Friday (July 2). The levy will apply to numerous companies, most being European, executive vice-president Margrethe Vestager said.
The 27 countries comprising the European Union came to an agreement last year to borrow 750 billion euros ($887 billion) for a post-pandemic recovery fund. The money will be paid back across the next 30 years, most coming from tax levies on the digital economy and on CO2 emissions, according to the article.
The agreement crafted by the Organization for Economic Cooperation and Development (OECD) outlines new pandemic recovery mandates funded by a minimum tax rate of 15 percent. Vestager said the EU is moving forward, but she didn’t commit to a specific tax rate, per the article.
“If we can get this fully endorsed and implemented and tax authorities have the resources actually to claim the taxes, well, then some of the companies which pay very little or nothing in taxes today, they will contribute in the societies where they do their business,” Vestager told Reuters, per U.S. News.
Although she didn’t offer specifics regarding affected companies, she said the EC is anticipated to make a formal announcement on July 14. She added that the EU digital levy has a broader scope than the OECD tax deal.
“Where the OECD agreement is for the 100 biggest companies, this is for many, many more companies,” she said, per U.S. News.
“I do appreciate that for a company, no matter what you call it, it’s a cost,” she said, adding that companies should see it as a normal cost of doing business in Europe.
U.S. Treasury Secretary Janet Yellen said in February that Washington is considering dropping part of its proposal for global tax reform to help facilitate the agreement concerning tech companies.