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Politics

Cyprus Veto Would Block EU OK of Biden Corporate Tax Plan

June 6, 2021

Still fighting a reputation as being a tax haven for companies and criminals using banks to launder money, Cyprus could also prevent the European Union from going along with US President Joe Biden's proposed worldwide minimum corporate tax rate.

EU decisions require the unanimous approval of all 27 member states and Cyprus is still reeling from ending a scheme that sold off residency permits and EU passports to rich foreigners, many going to those with criminal backgrounds.

Cypriot Finance Minister Constantinos Petrides said his government would be opposed to an EU directive that constrained national tax policymaking, the British newspaper The Guardian said.

A White House proposal of a 15 percent tax rate for multinationals applied to profits in all jurisdictions is expected to be endorsed in principle by finance ministers of the world’s seven largest economies, the G7, at an upcoming meeting in Cornwall, England, the report said.

The idea was to try to prevent firms with global reaches from shifting profits across borders to countries with lower tax rates, such as Luxembourg, where a whistleblower revealed a scheme offering advantages to big companies.

Biden's proposal would aim to stop the transferring of money by having the country where a business is headquartered add a tax to make sure a 15 percent minimum is reached.

While there is support in the EU for the idea – Luxembourg is not a member – Petrides told the European Parliament's Economic and Monetary Affairs Committee that Cyprus isn't warm to the proposal.

Cyprus and Ireland have the lowest corporate tax rates in the EU at 12.5%, and both countries said that's a question of national sovereignty, a frequent stance countries opposed to ideas they don't like take to prevent them being imposed.

“We are in favor of retaining the policy of setting the tax rate as a national competency, maintaining a level of corporate tax rate suitable for the sustainable development of the economy and investments,” Petrides said, the paper reported.

Sven Giegold, a German Member of the European Parliament who is the finance spokesperson for the Greens in the European parliament, said a “coalition of the willing” within the EU should still sign up with the Biden plan.

He said: “It is an illusion to think that we can make significant progress in tax matters without exploring alternatives to the unanimity principle in council.

“We have to stop European tax havens like Ireland and Cyprus from sabotaging much-needed progress in tax matters,” he said, without suggesting how it could be done under the EU's strict unanimous consent policy.

“Instead of snuggling with inner-European tax havens, European countries should join the US in developing a progressive tax agenda,” he added.

Biden had initially proposed a 21 percent global tax rate but that was chipped away at after major economies objected, tilting in favor of multi-national corporations who have a powerful reach.

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