BusinessEurope Warns EU That Pillar Two Could Harm Competitiveness Amid Shifting Global Tax Landscape

The European Commission has received a stark warning from BusinessEurope, the continent’s most prominent business lobby, cautioning that the OECD’s pillar two initiative is now at risk of undermining its own objectives. The warning came in a letter sent on April 7 to EU tax commissioner Wopke Hoekstra by Markus Beyrer, director general of BusinessEurope.

Founded in 1958, BusinessEurope represents 42 national business federations across 36 countries, spanning the EU, the European Economic Area, and neighboring regions. In the letter, Beyrer expressed deep concern over recent global developments—particularly in the United States—that he said are reshaping the international tax environment in ways that jeopardize the original goals of pillar two.

“These developments risk placing European businesses at a significant structural disadvantage, undermining the objective of pillar two,” Beyrer wrote, pointing specifically to U.S. President Donald Trump’s public denunciation of the pillar two project in January and subsequent shifts in American tax and trade policy.

Beyrer emphasized that an “urgent reassessment” of the EU’s stance on pillar two is essential in order to avoid long-term damage to the economy, preserve fair competition, and protect the global standing of European firms. He stressed that pillar two’s success depends on widespread global implementation under the principle of a common approach, in which countries that do not adopt the rules still accept their application by other jurisdictions within the Inclusive Framework.

“Without global consensus in this regard, pillar two may lead to market distortions and expose European businesses to competitive and administrative disadvantages,” the letter stated.

The correspondence also flagged deeper concerns about the viability and equity of the framework itself. BusinessEurope warned that the ongoing uncertainty around its implementation could dissuade investment and complicate corporate planning. While the organization reaffirmed its commitment to the ideals behind “a truly global pillar two,” it also warned that the EU’s current trajectory risks weakening the global competitiveness of European enterprises.

“Before the adoption of the EU directive on pillar two [in 2022], we warned that the minimum tax must not end up as an ‘EU-only’ agreement, with the US not implementing it,” Beyrer recalled. “The EU nevertheless took the lead, assuming global consensus on a common approach. That assumption no longer holds.”

He concluded the letter by urging the European Commission to reassess its position, arguing that failure to do so may leave European companies vulnerable—not just economically, but geopolitically as well. “The EU must now reassess its position to ensure that pillar two does not undermine the competitiveness of European businesses or expose them to geopolitical and economic retaliation,” he wrote.

By fLEXI tEAM