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Estonia continues talks over OECD tax deal

7. September 2021 - 16:14

Minister of Finance Keit Pentus-Rosimannus met today with the U.S. Secretary of Commerce Gina Raimondo and the Secretary-General of OECD Mathias Cormann to discuss the status of OECD-led international tax reform.

Minister Pentus-Rosimannus emphasized Estonia’s goal to reach an agreement that would accommodate the country’s investment-friendly corporate income tax system. “We are searching for a compromise enabling us to preserve our system which was designed to encourage investment and job creation,” stated the Minister. “The deal forged at OECD in July is not entirely acceptable to us. It is too vague, with a number of details that could prove harmful to a small open economy such as ours. We do however hope that by October we have resolved the matter in a way catering for Estonia’s interests as well.“

The OECD-co-ordinated Inclusive Framework approved the statement on International Tax Reform on July 1st this year. The two-pillar reform comprises so-called digital tax for corporations with group revenue exceeding EUR 20 billion, and global minimum tax at the rate of 15% for corporations with revenue exceeding EUR 750 million.

The new digital tax has Estonia’s full support. Although it spans wider than strictly digital revenue, it’s a necessary tool to allocate taxing rights to the countries where corporations earn income without being physically present.

The global minimum tax, on the other hand, fails to take into account Estonia’s current distribution tax system. “Our system is not designed to promote tax avoidance. Hence, we expect the OECD to accept a few modifications. The negotiations are ongoing,” said the Minister. “Estonia’s corporate income tax revenue, as a percentage of GDP, roughly equals that of Germany and France, and surpasses the U.S. This proves the efficiency of our system.”

OECD plans to finalize the agreement on the reform’s technical details in October 2021.