EU eyes global tax deal revenue to boost next budget

The European Commission is considering using revenue from a global tax agreement on multinational companies to fund the EU's upcoming seven-year budget, according to EU diplomats familiar with the talks. This proposal aims to help resolve the longstanding budget negotiations, which have been facing a significant obstacle in the form of new EU-wide taxes.

European Council President António Costa has been urging countries to agree on these new taxes to reduce national contributions to the bloc's budget, which is estimated at €1.82 trillion. However, EU governments remain divided over five proposed new taxes, with the most contentious being CORE, a corporate tax that charges a lump sum on companies' revenues exceeding €100 million.

French President Emmanuel Macron has shown support for funneling part of the multinationals' tax revenue to the EU budget, a move that could potentially garner more political support than CORE. The proposed tax deal, established by the OECD in 2021, requires EU countries to impose a 15 percent minimum corporate tax on large multinationals with annual turnovers exceeding €750 million.

The U.S. has been granted an exemption from these rules, as its national tax arrangement is deemed equivalent to the OECD framework. The primary objective is to prevent countries from competing to offer increasingly lower corporate tax rates to attract multinational companies. Currently, the revenue generated from the top-up tax is collected by national governments.

However, European governments could potentially redirect a portion of these funds to the EU's budget, a move that could disproportionately impact countries with low corporate tax rates, such as Ireland and the Netherlands.