Corporate tax avoidance costs EU countries €50-70 billion in lost revenue a year, according to the European Commission. On 2 February it discussed with MEPs how it plans to make corporate taxation fairer and more efficient. The Lux Leaks scandal showed that EU countries sometimes court multinationals with advantageous tax schemes. Parliament has set up two special committees to investigate and called on the Commission to introduce legislation to restrain these practices.
The Commission's action plan on corporate taxation focusses on establishing a common consolidated corporate tax base in the EU as well as making companies pay taxes in countries where they make their profits.
Having a common tax base would involve EU countries agreeing which categories of companies' revenue they would levy their taxes on. It wouldn't necessarily mean taxes would be harmonised, but it would introduce more transparency as companies would be forced to declare their profits where they are created.
Parliament demands action
The Commission's action plan is in line with a report by MEPs Anneliese Dodds, a UK member of the S&D group, and Luděk Niedermayer, a Czech member of the EPP group, which calls on the EU's executive body to propose legislation requiring EU countries to inform each other when taking measures that lower tax rates for corporations.
The two MEPs also call for corporations reporting how much tax they pay on a country-by-country basis as well as for protection of whistleblowers uncovering scandals such as Lux leaks.
Some MEPs have already welcomed the Commission's latest proposals. French EPP member Alain Lamassoure said: "The absurd outcome of Google's tax treatment in the United Kingdom is the best illustration of the necessity to have a single European regime to tax globalized activities."
In order to balance their budgets, EU governments have cut spending while at the same time some countries have offered multinationals deals that significantly lower their tax burden, thereby preventing other countries from receiving this potential tax revenue.
Parliament set up two special committees in 2015 to investigate these practices.
In October 2015 the Commission ruled that tax arrangements offered by Luxembourg to Fiat and by the Netherlands to Starbucks constituted illegal state aid, estimated to be €20-30 million for each company.
Portuguese S&D member Elisa Ferreira who co-authored the first tax rulings committee's report welcomed the decision, but warned: "These two cases have proven that tax competition among states to attract companies and profits is the norm in the EU."
In January, the Commission ordered Belgium to recover €700 million in unpaid taxes from 35 multinationals. These have benefited from a tax ruling scheme dubbed "only in Belgium", which the Commission considers to be a form of illegal state aid.
MEPs adopted the first special committee's report in November, calling for mandatory country-by-country reporting of profits and taxes by multinationals. They have also set up another special committee that will continue working on the issue until at least June 2016.
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