Saturday

24th Feb 2018

EU states warm to tax avoidance measures

  • "Governments will need to look closely at their current tax systems and assess if they meet public expectation,” EU commission vice-president Jyrki Katainen said. (Photo: Fotolia)

The EU is accelerating towards stronger legislation on corporate tax in the wake of the European Commission's order to Apple to pay a record-breaking €13 billion of tax in Ireland.

At a meeting in Bratislava, finance ministers appeared to achieve broad consensus and endorsed a European Commission proposal to fight tax avoidance.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The aim is to reduce tax uncertainty through implementation of already existing tax laws alongside “further harmonisation and binding tax rulings”, Peter Kazimir, the Slovak finance minister whose country currently chairs the EU Council, said on Saturday (10 September) after the meeting.

Ministers also discussed the creation of a common consolidated corporate tax base, or CCCTB.

The plan was first put forward by the commission in 2011, but at the time received little support from member states.

That mood changed after revelations like LuxLeaks or the Panama Papers and on the back of widespread political consensus for stronger corporate tax law in Europe. The commission is poised to re-propose CCCTB legislation later this autumn.

“We’ve heard the need for certainty and for rules. That is the very idea of the CCCTB," Kazimir said.

"This has elements of harmonisation, but the point is to reduce costs and to build certainty for those who create jobs.”

Under a CCCTB, European corporations would file a single tax return for all of their activity inside the EU, instead of filing separate tax returns in each country.

The scheme would also end transfer-pricing benefits across the EU, which Apple used to avoid tax for its European profits, and harmonise rules on tax deductions.

It could erase competitive taxation benefits that member states use to attract international business to their economies.

“A CCCTB would limit tax competition between countries, regarding their tax bases," said Scott Greenberg, an analyst at the Tax Foundation, a research organisation based in Washington DC.

"While countries would still be able to set lower corporate tax rates to attract businesses and investment, they would no longer be able to alter their tax bases to achieve the same goals.”

However, a CCCTB would simplify many of the complexities that come with separate tax regimes in 28 different member states, including the risk of double taxation for a single product or service.

“Double taxation is a severe hindrance to the internal market. Improving double tax resolution would also re-balance the EU's policy on taxation, which has been lately been very much focused on the interest of member states, and not taxpayers,” said Rudolf Reibel, tax policy manager for the Confederation Fiscale Europeenne, an association of tax advisers.

But, given the political sensitivity of tax consolidation, the commission is unlikely to build an entirely consolidated tax base in its new model for European tax law.

Tax consolidation would allow for companies active in Europe to consolidate their profits and losses in different member states into one single European tax return, which would after be apportioned to member states according to the company’s business activity in that country.

Eliminating uncertainty

But the significant impact that a consolidated tax base could have on member states’ corporate tax revenues has led the commission to cut tax consolidation from its 2016 proposals.

Finance ministers also discussed the proper balance between a crackdown on tax avoidance and a guarantee of tax certainty for European business.

“The introduction of measures to tackle double non-taxation must be combined with efforts to avoid undue uncertainty in tax policy and administration,” a note circulated by the Slovak EU presidency at the ministers meeting pointed out.

The document however said that “coherent implementation of such measures in form of hard law within EU allows for predictability and eliminates a degree of uncertainty and possible double taxation”.

Ministers also endorsed the idea of an increased transparency inside of the financial industry, including measures for the automatic exchange of information between banks and tax authorities.

“The EU has to step up inter-agency cooperation and improved exchange of information. We also need to introduce mandatory disclosure rules for banks of intermediaries who want to profit from tax evasion,” Kazimir said.

'Times are changing'

Fair tax campaigners argue the increased transparency would create a level playing field for tax in Europe, but tax policy experts argue that tax rulings should be kept anonymised.

“Tax rulings and advance pricing agreements are standard legal instruments to create legal certainty for companies. Almost all member states issue tax rulings and usually have nothing to do with aggressive tax planning,” Rudolf Reibel said.

But for EU officials, some reform is needed because the issue has become highly political.

“What’s clear is that with every new case of unfair tax practice or abuse, public frustration grows. Governments will need to look closely at their current tax systems and assess if they meet public expectation,” EU commission vice-president Jyrki Katainen said in Bratislava.

“Times are changing,” summarised Eurogroup president Jeroen Dijsselbloem.

Finance ministers baulk at tax-avoidance rules

Member states will discuss again in June a proposed directive to outlaw practices used by large companies to avoid paying taxes. Meanwhile, the European Parliament makes progress on its probe of Panama Papers.

Irish government in moral dilemma on Apple tax

Anti-poverty activists in Ireland say the government's decision to appeal an EU commission order for Apple to pay back €13 billion undermines its moral authority.

EU tax haven list could name US

The EU commission plans to name and shame foreign tax havens in a new list, but will EU capitals keep their friends, such as the US, out of the register?

Opinion

Greek government's steady steps to exit bailout programme

Growth predictions are positive, exports increasing, unemployment dropping and credit-ratings up, says the head of Greece's Syriza delegation to the European Parliament. Now the government in Athens is looking to design its own reform programme.

Analysis

We are not (yet) one people

Talks on the next EU budget will start on Friday. Brussels wants to do much more than before – and needs a lot more money. But arguing about funds won't be enough.

News in Brief

  1. EU calls for immediate ceasefire in Syria
  2. UK's post-Brexit vision is 'pure illusion', Tusk says
  3. EU leaders express solidarity with Cyprus in Turkey drill row
  4. EU to double funding for Sahel forces
  5. EU parliament president: 'The immigration problem is Africa'
  6. May to unveil EU departure strategy next week
  7. Pregnant workers may be dismissed, EU court rules
  8. Romanian minister demands anti-corruption prosecutor fired

Stakeholders' Highlights

  1. ILGA EuropeAnkara Ban on LGBTI Events Continues as Turkish Courts Reject NGO Appeals
  2. Aid & Trade LondonJoin Thousands of Stakeholders of the Global Aid Industry at Aid & Trade London
  3. Macedonian Human Rights Movement Int.European Free Alliance Joins MHRMI to End the Anti-Macedonian Name Negotiations
  4. Mission of China to the EUChina-EU Tourism Year to Promote Business and Mutual Ties
  5. European Jewish CongressAt “An End to Antisemitism!” Conference, Dr. Kantor Calls for Ambitious Solutions
  6. UNESDAA Year Ago UNESDA Members Pledged to Reduce Added Sugars in Soft Drinks by 10%
  7. International Partnership for Human RightsUzbekistan: Investigate Torture of Journalist
  8. CESICESI@Noon on ‘Digitalisation & Future of Work: Social Protection For All?’ - March 7
  9. UNICEFExecutive Director's Committment to Tackling Sexual Exploitation and Abuse of Children
  10. Nordic Council of MinistersState of the Nordic Region 2018: Facts, Figures and Rankings of the 74 Regions
  11. Mission of China to the EUDigital Economy Shaping China's Future, Over 30% of GDP
  12. Macedonian Human Rights Movement Int.Suing the Governments of Macedonia and Greece for Changing Macedonia's Name

Latest News

  1. EU agrees budget to focus on defence, security and migration
  2. EU leaders nix transnational lists, cool on 'Spitzenkandidat'
  3. Regions chief: calls for smaller EU budget are 'impossible'
  4. Election fever picks up This WEEK
  5. EU-Morocco fishing deal casts doubt on EU future foreign policy
  6. EU leaders put 'Spitzenkandidat' on summit menu
  7. European far-right political party risks collapse
  8. The key budget issues on EU leaders' table

Stakeholders' Highlights

  1. Swedish EnterprisesHarnessing Globalization- at What Cost? Keynote Speaker Commissioner Malmström
  2. European Friends of ArmeniaSave The Date 28/02: “Nagorno-Karabakh & the EU: 1988-2018”
  3. European Heart NetworkSmart CAP is Triple Win for Economy, Environment and Health
  4. European Free AlllianceEFA Joined the Protest in Aiacciu to Solicit a Dialogue After the Elections
  5. EPSUDrinking Water Directive Step Forward but Human Right to Water Not Recognized
  6. European Gaming & Betting AssociationGambling Operators File Data Protection Complaint Against Payment Block in Norway
  7. European Jewish CongressEJC Expresses Deep Concern Over Proposed Holocaust Law in Poland
  8. CECEConstruction Industry Gets Together to Discuss the Digital Revolution @ the EU Industry Days
  9. Mission of China to the EUChina-EU Relations in the New Era
  10. European Free AlllianceEnd Discrimination of European Minorities - Sign the Minority Safepack Initiative
  11. Centre Maurits Coppieters“Diversity Shouldn’t Be Only a Slogan” Lorant Vincze (Fuen) Warns European Commission
  12. Dialogue PlatformWhat Can Christians Learn from a Global Islamic Movement?