Monday

20th May 2019

EU in new push for common corporate tax base

  • Pierre Moscovici - hoping the "pressure" of public opinion will make member states reach a deal (Photo: EU Council)

The European Commission Wednesday (17 June) announced plans meant to put an end to secretive 'sweetheart' tax deals for multinationals and nudge member states towards common corporate tax rules, hoping that public opinion will push governments to a deal on the highly contentious issue.

Corporate tax systems should be "fairer" said EU commissioner Pierre Moscovici, adding: "It is no longer tolerable that some companies - often the most profitable - avoid their fair contribution of tax and that certain tax regimes encourage this".

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At the heart of the plans - to be published as concrete legislative proposals early in 2016 - is a re-launch of a proposal for a common tax base across the EU for multinationals.

The current proposal has been stuck in the legislative pipelines - largely due to objections from countries such as Ireland and the UK - since 2011, but the political dynamics around the discussion have changed amid public anger over revelations that large companies avoid tax bills by shifting profits to countries offering low rates or sweetheart deals.

This time, says the commision, the so-called common consolidated corporate tax base (CCCTB), will be approached in two steps.

"Since the current proposal has proven too vast to agree in one go, we will [focus] first on the idea of a common base and move later towards consolidation," said Moscovici.

While member states are seen as open to talking about having a mandatory common base for multinationals across member states, the 'consolidation' part is seen as the first step to tax harmonisation, which rings 'sovereignty' alarm bells in several capitals.

However Moscovici believes the commission now has a greater chance of reaching a deal as the EU's moves are "part of a (global) trend" and "there is the pressure of public opinion".

The commission has kept this as a high priority issue after a journalistic investigation last year revealed that Luxembourg under prime minister Jean-Claude Juncker, who is now the head of the European Commission, had special arrangements allowing 343 multinationals to pay as little tax as possible.

The revelations resonated strongly as governments across Europe have been slashing spending policies amid the economic crisis.

"There is strong consensus that companies must pay a fair level of tax where they generate their profits. But there's less clarity on how to achieve this," said Moscovici.

He said a "common approach" could include "limiting low or no tax schemes and reinforcing our common anti-abuse artillery".

Transparency

Answering a transparency call by campaigners for tax justice, the commission also said it will set up a "public consultation" on whether companies should divulge certain information about their tax schemes.

The commission also listed 30 tax havens, most of them in the Americas and four - Andorra, Liechtenstein, Guernsey and Monaco - in Europe.

Reactions to the proposals were mixed with the centre-right EPP welcoming the commission's step-by-step approach on CCCTB but the Greens saying it "means the end of corporate tax dodging is inevitably also delayed".

Meanwhile others were concerned that a public consultation on whether companies should give country-by-country information on tax set-ups is an unnecessary delay.

"This should not slow down the momentum for financial transparency," said Tamira Gunzburg, director of ONE, a development NGO.

Eurodad, also a NGO, said the EU's blacklist on tax haven should have mentioned the "big problems in the EU’s own backyard, including Luxembourg, Ireland and the Netherlands".

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