Estonian finance minister: Global corporate tax hurts small economies

G7 leaders agreed on Sunday to a global 15% corporate income tax for companies regardless of where they are based. The aim of the long-anticipated reform is to end competition using low tax rates in the hope of attracting corporate giants. [EPA/MARKKU OJALA]

Estonian Finance Minister Keit Pentus-Rosimannus has come out against proposals for a global corporate income tax, calling it “harmful for enterprise, international competition and job creation.”

G7 leaders agreed on Sunday to a global 15% corporate income tax for companies regardless of where they are based. The aim of the long-anticipated reform is to end competition using low tax rates in the hope of attracting corporate giants.

Initial reactions to the new tax rate were positive, including from digital giants like Google and Facebook. However, Estonia did not show the same enthusiasm despite estimates pointing to the proposal bringing €10 million in additional tax revenue to the country.

The scheme limits tax competition and tax policy choices between different countries, minister Pentus-Rosimannus of the market-liberal Reform Party told ERR News on Tuesday, adding that it would be “constricting” for small countries.

A healthy tax competition “usually supports growth and innovation”, but now the G7 proposal is moving “in the opposite direction,” she added.

Under Estonia’s corporate income tax system only dividends are taxed while earnings are not if they are reinvested into a company. In the interview, the minister implied that the corporate income tax system exceptions it applied for in recent years will also be applied in the future. (Pekka Vänttinen | EURACTIV.com)

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