How to bring a harmonized GloBE minimum tax in compliance with EU fundamental freedoms

Abstract

Both the EU Commission and several EU Member States would like to see an international effective minimum tax implemented across the Union. The preferred solution would be the GloBE concept currently discussed within the G20/OECD Inclusive Framework. However, objections have been raised with respect to the compatibility of such a tax regime with the EU/EEA free movement rights. Under the conventional standards established by the European Court of Justice, the G20/OECDE Blueprint for GloBE, and the envisaged Income Inclusion Rule (IIR) in particular, could indeed only be implemented if significantly watered down. In order to safeguard the essential objectives of a harmonized GloBE-style minimum tax and nevertheless increase chances as to its compatibility with the free movement rights, the proposed collection mechanisms therefore need to be modified for intra-EU/EEA scenarios. In the literature, it has sometimes been proposed to extend the operation of the minimum tax to purely domestic situations. Such a solution is not ideal, however, because it would entail unnecessary administrative and compliance costs. This contribution therefore explores how harmonization by the Union legislator would clear the path for another alternative which would furthermore also facilitate compliance.