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EU recovery plan contemplates 'single market tax'

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The European Commission has issued a proposal for an EU post-Covid recovery fund which would allow the EU to borrow up to €750bn to invest in programmes to support economic recovery. Under its Recovery plan for Europe, the funds would be repayable potentially over 30 years from 2028 onwards and taken gradually from future EU Budgets.

To service the debt, the following package of measures is being considered:

  • a ‘single market tax’ on the operation of large companies ‘that draw huge benefits from the EU single market’ (estimated to yield €10bn annually);
  • an EU digital tax on companies with a turnover of more than € 750m (estimated to yield €1.3bn annually), but only if international agreement is not reached via the OECD;
  • an emissions trading scheme-based own resource (estimated to yield €10bn annually); and
  • a carbon border adjustment mechanism (estimated to yield €5–14bn annually).

According to press reports, the ‘single market tax’ could come into force on or after 2024, and affect 70,000 companies in Europe with global turnover exceeding €750m. ‘Depending on the design, whether a lump sum or a fee proportional to firms’ size, or a portion of a tax on profits, around €10bn could be raised without excessively weighing on any individual firm,’ a Commission spokesperson said. ‘€10bn is less than 0.2% of the turnover generated by the EU operations of those large companies.’

Commenting on Twitter, Dan Neidle, head of the London tax group at Clifford Chance, noted that ‘turnover taxes exploit a loophole in tax treaties and so let the EU tax US companies without needing the US to agree treaty changes’, adding: ‘We’ll see how well that works out politically’.

PwC notes that any package of grants involving raising the EU budget, and giving EU-level taxing rights to the Commission, is likely to be controversial among member states, and approval (requiring unanimity) may be difficult to secure.
Issue: 1490
Categories: News