The European Commission unveiled a bill Wednesday that will introduce a global initiative for a minimum effective corporate tax rate of 15 percent for companies with annual revenue of €750 million or more.
The tax rate is part of a two-pronged accord that the Organization for Economic Cooperation and Development brokered in October to obliterate tax havens and ensure multinational firms pay their fair share of dues.
The OECD accord also includes a levy on the world’s 100 biggest companies. The global standard-setter will flesh out the levy in the new year and the Commission will then move to introduce it in another EU bill. The 15 percent tax rate is set to be operational from the start of 2023.
“By moving quickly to align with the far-reaching OECD agreement, Europe is playing its full part in creating a fairer global system for corporate taxation,” Commission Executive Vice President Valdis Dombrovskis said in a statement. “Putting the OECD agreement on minimum effective taxation into EU law will be vital for fighting tax avoidance and evasion while preventing a ‘race to the bottom’ with unhealthy tax competition between countries.”
Alongside the EU’s bill for Pillar 2, the Commission proposed rules that will neutralize any shell companies across the bloc that are designed to dodge taxes. Both initiatives will need unanimous support among EU governments to become law.