Tuesday

16th Oct 2018

MEPs want companies tax dodges repaid into EU budget

  • Estimates cited by the European Parliament suggest the annual value of tax fraud and tax avoidance is up to €1 trillion (Photo: Wolfgang Staudt)

The proceeds from illegal tax breaks brokered between an EU state and a multinational company, known as clawbacks, should be returned either to the EU budget or to the coffer of other states unfairly deprived of the money, according to MEPs.

The idea was endorsed by the European parliament in a non-binding resolution adopted on Tuesday (19 January) in Strasbourg.

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German centre-right MEP Werner Langen, who drafted the parliamentary report, said in a statement that "countries that play unfair tricks must not profit twice".

The report asks the EU Commission to modify current rules so that amounts recovered do not go to the member state which granted the illegal tax-related state aid.

The vast majority of MEPs agreed. Langen's report was passed 500 votes to 137, with 73 abstentions.

The idea is meant to dissuade national tax authorities and big companies from drafting tailor-made tax rulings that divert money away from national public coffers.

Citizens of the state where the tax should have been paid would then be deprived of the extra revenue, in part because their national authorities had created schemes deemed illegal by the EU's top competition authority.

The non-binding report is unlikely to gain much support from member states.

'It's just logic'

But a parliament contact close to the issue said it is "just logic".

"If something like this is punished, then money generated through this punishment should be at the disposal of the whole of the Union and not only the member state who engaged in this kind of practice", he said.

The EU's annual budget for 2016, drawn primarily from EU states and their taxpayers, is €155 billion.

Unlike tax clawbacks, fines settled against companies are deducted from the overall contribution by member states to the EU budget.

In 2013, computer software giant Microsoft was fined €561 million in an anti-trust case for failing to offer users a choice of web browser. It paid in full.

The most recent clawback case dates from only last week when the commission deemed that Belgian state tax breaks, which had benefited some 35 multinationals, were illegal.

The companies are now required to return some €500 million of the €700 million in unfair tax breaks back to the Belgian national authorities that brokered the illegal deal in the first place.

"National tax authorities cannot establish tax schemes that only benefit a select group of companies, in this case, multinationals", said Margrethe Vestager, the EU competition commissioner.

We’ll survive

The 47-year old competition chief has also led state aid tax cases against Starbucks in the Netherlands, Fiat and Amazon in Luxembourg, and Apple in Ireland. Fiat and Starbucks were each told to pay up to €30 million last October.

People probing unfair rulings estimate that thousands of tailor-made tax deals have been agreed in places like Ireland, Luxembourg and the Netherlands.

A probe into such rulings by the International Consortium of Investigative Journalists (ICIJ) in 2014 found Luxembourg authorities had helped cut the global tax bill of some 340 companies.

Most of those deals were designed in secret by big accounting firms like PricewaterhouseCoopers.

The Luxembourg schemes alone are said to have saved the firms billions in taxable revenue.

Development charity Oxfam, in a report out earlier this week, urged the global and corporate elite gathering at the World Economic Forum in Davos to "put an end to the era of tax havens".

It noted that 188 of 201 leading companies had a presence in at least one tax haven.

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