LUXEMBOURG: EU finance ministers worked on Thursday to find European unity on striking an international deal on taxation, with low-tax countries Ireland and Hungary needing cajoling to stay on board.
Finance ministers from the G20 countries will meet in Venice next month in hopes of agreeing a broad outline on new rules for worldwide taxation that would include a minimum tax on the world's biggest companies.
That proposal has caused ructions in some EU countries such as Ireland, Luxembourg, Poland and Hungary that have relied on low tax rates to attract multinationals and build their economies.
"There are still states to be convinced, but the best way to convince them is to talk to them," said French Finance Minister Bruno Le Maire as he arrived for a two-day meeting with his EU counterparts.
Le Maire said he would raise the matter with Irish Finance Minister Paschal Donohoe and fly to Poland on Sunday to talk with his counterpart there.
He said he would also hold meetings with Chinese, Indian and Russian officials next week.
"We know change is coming, we want to be part of that change," Irish Finance Minister Paschal Donohoe told reporters.
However, he argued that Ireland lacked "the advantages of scale and location" of bigger member states and that taxation can be "part of a competitive offering".
Ireland, the EU home to tech giants Facebook, Google and Apple, has a corporate tax rate of 12.5 per cent, lower than the current proposal for a minimum global tax of 15 per cent.
Donohoe said earlier this month that the new rules, if achieved, could see Ireland lose 20 per cent of its corporate revenue.
After the G20, 139 countries under the aegis of the OECD will have to sign off on the major overhaul of taxation norms, a daunting prospect.
"We worked very hard in the last years to get an agreement.. we are now trying to (achieve) all the breakthroughs," said German Finance Minister Olaf Scholz.
Meanwhile, the EU finance ministers again dampened expectations on completing major banking reforms in Europe, with big divisions between Germany and Italy on how to move forward.
"We must never lose hope. I don't hide from you that it's a difficult negotiation," Bruno Le Maire said, as he arrived for talks.
At the meeting, ministers were supposed to finalise a timetable for completing the EU's banking union, a major step in advancing European economic unity that was launched in the heart of the financial crisis.
The missing piece of the project is the creation of a common European deposit insurance that would cast a continent-wide safety net for customers hit by failing banks.
Germany has long resisted the idea, however, with public opinion dead set against seeing government money going to save depositors in other European countries.
In exchange for giving ground on the issue, Germany and others are demanding that countries like Italy decouple the stability of their banking systems from holdings in national debt.
This would address something known as the "doom loop", where banks in Europe are allowed to hold sovereign debt bonds as super-safe assets to meet the demands of banking regulators.
Heavily indebted, Italy refuses to give ground on this demand, afraid it could spark a national banking crisis and plunge the country into economic chaos.
"There is further work that needs to be done, further compromises that have to be identified and then delivered," said Eurogroup chief Paschal Donohoe, who is leading the negotiations.
"With the time that is left, it wasn't sufficient to deliver what I believe was critical in such a work plan," added Donohoe, who is also Irish finance minister.
The election calendar in Europe is making a breakthrough even more difficult, officials said, with Germany set to choose a new chancellor in the autumn. A senior eurozone official said the setback was not a "big drama" and that Donohoe was determined to keep working on finding a compromise. - AFP
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