UPDATE 3-After US push, EU suspends tax plan, but Ireland sticks to its guns

(rewritten with Yellen, Donohoe, Gentiloni)

By Francesco Guarascio and David Lawder

BRUSSELS, July 12 (Reuters) – The European Union has agreed to delay a corporate tax plan for the bloc following pressure from the U.S. administration and in a bid to facilitate a broader global tax deal, but the Ireland, a member of the EU, reiterated its criticism of reform.

The world’s 20 largest economies on Saturday approved a plan for a global corporate tax overhaul that would introduce a minimum tax rate and change the way large companies like Amazon and Google are taxed, in part based on where they sell their products and services rather than where they have their head office.

The reform, if finalized in October, would require parliamentary approval in the more than 130 countries that support it, including the US Congress where it could face opposition from Republicans. All EU member states must also endorse tax reforms, including the envisaged global deal.

In an attempt to remove a possible obstacle to the global deal, the EU bowed to pressure from the United States and said on Monday it would delay its own proposed separate tax on online sales, which it said the US administration, could have led to more criticism of the global tax reform in the US Congress. “We have decided to suspend our work on our new digital tax,” European Commission spokesman Daniel Ferrie told a press conference in Brussels on Monday, noting that the bloc would reassess the situation in the fall. The tax proposal was slated for later in July.

The announcement coincided with U.S. Treasury Secretary Janet Yellen’s visit to Brussels and followed repeated pressure from her at a G20 summit over the weekend and before.

European Economic Commissioner Paolo Gentiloni told reporters that postponing the bloc’s plan would make it easier to focus on achieving the “last mile” of the global deal.

However, there remains reluctance towards the global deal, including three EU countries – Ireland, Hungary and Estonia.

Ireland has said it cannot support the 15% floor for the global tax rate, which aims to prevent multinationals from seeking the lowest tax rate, but would force Dublin to increase its tax rate. 12.5%, which helped convince several companies to make the island their EU headquarters.

Yellen on Monday reiterated his call for the 27 EU countries to join the global deal.

“We need to put an end to companies that shift their capital income to low-tax jurisdictions and to accounting tricks that allow them to avoid paying their fair share,” she said in a statement.

But Irish Finance Minister Paschal Donohoe does not appear to have changed his criticism of the reform. After a meeting with Yellen, his spokesperson said he had reiterated Ireland’s support for the change in the taxation of multinationals but his opposition to the minimum rate of 15%.

Donohoe, however, said Ireland was engaged in the process and was ready to engage in the coming weeks with the Organization for Economic Co-operation and Development (OECD) which is coordinating talks on global reform. (Reporting by Francesco Guarascio, David Lawder and Philip Blenkinsop; Editing by Alex Richardson and Hugh Lawson)

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