Thursday

24th May 2018

Opinion

The great EU corporate tax lie

  • The CCCTB is 'lacklustre, unacceptable policy-making' (Photo: ptmoney.com)

As three MEPs who take subsidiarity and proportionality seriously, we face an almost daily battle against a European Parliament and an EU Commission that, under the banner of fighting tax avoidance, are intent on rewriting the rules for corporate tax policy in the EU, exclusively for the benefit of larger member states.

Last week the Economic and Monetary Affairs Committee voted overwhelmingly in favour of recommendations to impose a Common Consolidated Corporate Tax Base (CCCTB) in Europe, a proposal that would completely change how companies are taxed in the EU.

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 commission first proposed CCCTB in 2011 but came up against significant resistance in the European Council. But if at first you don't succeed, then try again.

Thus, the commission proposed a revamped version of CCCTB in 2016; although this time instead of making it optional for businesses, they proposed that it would be mandatory for all companies with an annual turnover of more than €750m.

Harmonisation by back door

The CCCTB is in short the EU's attempt to completely harmonise corporation tax policy by the back door, creating a common system for taxing large companies across Europe.

Corporate tax is then consolidated according to a complicated set of criteria and distributed out to member states based on the level of economic activity that takes place in their jurisdiction.

The consolidation key favours – again – the larger member states where maybe the factories have been build, but not per se the place where due to high investments in research, development and innovation, the profit is actually being made.

It sounds great in principle. But in all this, it is the large member states have the most to gain and the small member states that have most to lose.

It is no secret that many large multinationals have based their EU headquarters in smaller member states like Ireland, Luxembourg and the Netherlands.

This development has not been looked on favourably by larger member states who feel they deserve their piece of the corporate tax pie. The commission seems to agree and that is why it has been on its CCCTB crusade for years, albeit with little success.

This CCCTB agenda has conveniently been associated with the whole debate surrounding tax evasion and tax avoidance which rightly must be tackled.

'Disingenuous' tax avoidance claims

But it is disingenuous to suggest that CCCTB will do much to curb tax avoidance. Pretending it will, comes close to a lie or is at least a serious misrepresentation of reality.

In fact, many tax experts have even said that CCCTB could open Europe up to more tax loopholes and create more tax mismatches with third countries.

In any case, proportional country-by-country reporting and the tackling of hybrid mismatches will go much further in the fight against aggressive tax planning.

Not surprisingly, the ECON recommendations as voted last week go further than the original commission proposal.

MEPs want the €750m threshold to be reduced to zero after seven years, meaning that eventually all European companies, even the smallest ones and those active in only one member state, would have to apply CCCTB.

Another bizarre suggestion

Sure, the report also has interesting suggestions, such as tech giants paying taxes on the basis of how much data has been used per member state, but again it is completely unclear what the consequences of this change would be.

At the end of the day, this file is for a decision by the European council, subject to unanimity voting rules. While we believe that member states should continue to discuss and negotiate this proposal, we do not agree that there should be a one-sided overhaul of corporate tax policy in the EU.

The key issue that member states will be asking about CCCTB is how much they stand to win or lose in terms of tax collection.

But one serious problem in the whole CCCTB process is that the commission has never conducted a comprehensive impact assessment on a country-by-country basis.

How does the commission really expect member states to sign up to a proposal if the impact hasn't been quantified?

Lacklustre policy-making

This type of lacklustre policy-making is not acceptable.

It is absolutely right that multinationals pay their tax in a transparent and upfront way.

The EU is rightly determined to meet and implement the new international standards that are slowly catching up with the new digital economy.

We do have to tackle aggressive tax planning but this is not only a European problem, it is a global problem. The best way to tackle this issue is on an internationally agreed basis through the OECD 'base erosion and profit shifting' (BEPS) process.

Let's have a fair and honest debate about corporate tax policy in the EU.

Consensus has always been the name of the game when making big decisions in the EU, which is furthermore crucial to maintain support for the EU in every member state.

The right to raise taxes is a core competence of a sovereign states.

A fundamental overhaul of tax systems, decided by a majority against the will and interest of a minority will in that regard do more harm than good.

It would therefore seem wise to turn this debate away from easy one-liners and over-simplification towards an approach that takes the concerns of all member states into account.

If this turns out to be impossible, then we should refocus the debate and concentrate our efforts where they can be most effective.

Dutch MEP Esther de Lange, Irish MEP Brian Hayes, and Swedish MEP Gunnar Hoekmark

EU states loosen grip on tax havens

Finance ministers removed eight entities from the tax havens blacklist, while ruling out more transparency or sanctions - prompting criticism from tax-campaigning NGOs such as Oxfam.

Luxembourg not a tax haven, claims PM

The prime minister of Luxembourg, Xavier Bettel, maintains that his country had broken no rules and committed no crime when issuing rulings that slashed global tax bills for the big firms.

Integration of Syrian refugees in Europe needs scrutiny

Most refugee-related services are outsourced to the private sector and NGOs, which are not adequately monitored and evaluated. When governments and EU institutions provide funding for refugee projects, they should scrutinise the NGOs and private players they work with.

More commitment to renewables from Council, please

More and more consumers are likely to invest in solar panels in the future as it becomes simpler to produce one's own electricity, writes Monique Goyens, director general of BEUC, the European Consumer Organisation.

Stakeholders' Highlights

  1. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  2. Centre Maurits Coppieters“Peace and reconciliation is a process that takes decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  3. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  4. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  5. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  6. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  7. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments
  8. International Partnership for Human RightsAnnual Report celebrates organization’s tenth anniversary
  9. Nordic Council of MinistersNordic Cooperation Needed on Green Exports and Funding
  10. Mission of China to the EUPremier Li Confirms China Will Continue to Open Up
  11. European Jewish CongressCalls on Brussels University to Revoke Decision to Honour Ken Loach
  12. Sustainable Energy Week 2018"Lead the Clean Energy Transition"- Register and Join Us in Brussels from 5 to 7 May

Latest News

  1. 'Killer robot' projects eligible for EU defence fund
  2. Funding for European values needs radical changes
  3. Feeble EU format deflates Zuckerberg 'hearing'
  4. Are EU data watchdogs staffed for GDPR?
  5. EU pessimistic on permanent US trade exemption
  6. US asks EU to go after Russian and African villains
  7. Facebook threatened with removal from EU-US data pact
  8. Defence firms 'reap benefits' of advice to EU

Stakeholders' Highlights

  1. EU Green Week 2018Green Cities for a Greener Future. Join the Debate in Brussels from 22 to 24 May
  2. Nordic Council of Ministers12 Recommendations for Nordic Leadership on Climate and Environment
  3. Macedonian Human Rights MovementOxford Professor Calls for an End to the Anti-Macedonian Name Negotiations
  4. ACCAPeople Who Speak-Up Should Feel Safe to Do So
  5. Mission of China to the EUProgress on China-EU Cooperation
  6. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  7. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  8. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  9. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  10. UNICEFCalls for the Protection of Children in the Gaza Strip
  11. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  12. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight

Stakeholders' Highlights

  1. Macedonian Human Rights MovementMacedonians in Bulgaria Demand to End the Anti-Macedonian Name Negotiations
  2. Counter BalanceThe EIB Needs to Lead by Example on Tax Justice
  3. ILGA EuropeTrans People in Sweden to be Paid Compensation for Forced Sterilisation
  4. International Partnership for Human RightsThe Danger of Standing Up for Justice and Rights in Central Asia
  5. Mission of China to the EUChina and EU Must Work Together to Promote Global Steel Sector
  6. Swedish EnterprisesEU Tax Proposal on Digital Services Causes Concern for Small Exporting Economies
  7. European Jewish CongressCondemns the Horrific Murder of Holocaust Survivor Mireille Knoll in Paris
  8. Mission of China to the EUAn Open China Will Foster a World-Class Business Environment
  9. ECR GroupAn Opportunity to Help Shape a Better Future for Europe
  10. Counter BalanceControversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  11. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  12. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations