Week Ahead (28 June)

W/C Monday, 28 June - Commission to approve of further recovery and resilience plans

Last week the European Commission President, Ursula von der Leyen, travelled to Austria, Slovakia, Latvia, Germany, Italy, Belgium and France to confirm the Commission's approval of their respective recovery and resilience plans. The Commission President will continue her tour of member states this week and is expected to endorse the NRRPs of Slovenia on Thursday, followed by Lithuania on Friday. Recovery plans from Poland, Croatia, Hungary, Finland, Ireland, Cyprus and Sweden are likely to be approved in the coming weeks.

The European Council has a month in which to endorse the Commission's decision to approve the 12 plans adopted to date, and it is understood that it will engage extensively on the issue this week.

Wednesday, 30 June - Eurostat flash estimate for inflation to be released

Flash inflation data for June will be released on Wednesday.   The Eurostat release on inflation for May showed that Eurozone inflation rose to its highest level since late 2018 and now sits at 2%, up from the 1.6% reported in April 2021.  The rate stood at 0.1% during the same period last year. In the European Union as a whole, inflation reached 2.3% in May, increasing by 0.3% when compared to April. 

While the inflation rate for May exceeded the European Central Bank's mandated inflation target of below but close to 2%, the increase has been attributed to higher energy costs and pressures in the manufacturing sector associated with the reopening of economies across Europe as demand spikes. 

Economists expect that the rate will continue to increase in the coming months, potentially hitting 2.5% but will fade early in 2022.  Core inflation, which strips out items which are prone to fluctuation including energy, food, alcohol and tobacco, remained relatively low, at 1%. 

Wednesday, 30 June – OECD negotiators to meet in Paris for tax talks ahead of G20

Negotiators will meet on Wednesday in an attempt to finalise a global tax deal covering corporations and the digital economy in advance of a G20 meeting in mid-July.  Some 139 countries are involved in the talks which, according to Pascal Saint-Amans, director of the centre for tax policy at the OECD, could lead to the generation of additional global revenues to the tune of €126.4 billion per annum.

Several issues remain outstanding.  While G7 leaders agreed to set a minimum global corporate tax rate of 15% at talks in the UK on 11-13 June, other parties to the negotiations must also sign up to this proposal.  Some countries, including Ireland, which has a corporation tax rate of 12.5%, have held out against proposals that would see corporation tax rates rise significantly.

Agreement must also be reached on taxation for multinationals.  The US government has proposed a deal which would capture revenue from approximately 100 of the world's largest companies by taxing profits in the jurisdiction where sales are made.  However, this has proven controversial as it would only apply to companies with a profit margin of over 10%.  While this would bring around 100 companies into the tax net, including Google, Apple, and Facebook, it would not apply to Amazon as the company’s profit margin in 2020 was 6.3%. 

Once agreed, the deal must be passed through the national legislatures of the 139 countries party to the negotiations.