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Bringing transparency, coordination and convergence to corporate tax policies in the union - ECON report

In “Deeper and fairer internal market with a strengthened industrial base / Taxation”

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On 16 December 2015, the European Parliament adopted a resolution, prepared by the Committee on Economic and Monetary Affairs (ECON) (rapporteurs: Anneliese Dodds, S&D, United Kingdom and Ludek Niedermayer, EPP, Czech Republic), on 'bringing transparency, coordination and convergence to corporate tax policies in the Union', which builds on the work of the European Parliament's Special Committee on Tax Rulings (TAXE1) (see separate carriage). The need for coordination and convergence derives from the fact that Member States have power to legislate on corporate taxation, which often has cross-border and global impacts.

This ECON resolution, which is based on Article 225 TFEU, formally asks for a number of legislative proposals to be presented by the Commission. The resolution sets out 24 legislative recommendations to address issues relating to transparency, coordination and convergence. These cover:

  • 'country-by-country reporting' (CBCR) based on the OECD Base Erosion and Profit Shifting (BEPS) template (for reporting to administrations), taking account of the results of the Commission's consultation and Parliament's position on public reporting;
  • effective protection of whistle-blowers;
  • a 'fair tax payer' label linked with corporate social responsibility, a common European definition of tax havens and setting principles for tax amnesties and tax forgiveness schemes;
  • mandatory notification of new tax measures, as well as broader automatic exchange of information on tax rulings by Member States to other Member States and the Commission, and the possibility to oblige tax advisors to disclose certain tax schemes to national tax authorities;
  • a harmonised methodology to calculate the scale of corporate taxation loss, increased transparency of customs-free ports, improving Member States' coordination on tax controls and the introduction of a common European tax identification number; a common corporate tax base (CCTB) as a first-step measure with a temporary exemption for SMEs, to be followed by 'consolidation' (CCCTB), together with a general anti-abuse rule, and reform of the 'corporate taxation code of conduct' group;
  • measures to ensure that profits are taxed where they are generated and improving the transfer pricing framework in the EU so as to: (i) reflect the economic reality of the internal market; (ii) provide certainty, clarity and fairness for Member States and for companies operating within the Union; (iii) reduce the risk of misuse of the rules for profit-shifting purposes;
  • development of counter-measures and sanctions for those using aggressive tax measures ;
  • allowing the Union to speak with one voice in relation to international tax arrangements, and to mandate the Commission to negotiate tax agreements with third countries on behalf of the Union;
  • improvement of cross-border taxation dispute resolution and the introduction of a withholding tax or similar measure to stop profits from leaving the EU untaxed;
  • harmonisation of national definitions of debt, equity, opaque and transparent entities; of the attribution of assets and liabilities to permanent establishment, and of the allocation of costs and profits between different entities within the same group;
  • addressing the tax gap by, inter alia: (i) investigating sources of low efficiency regarding tax collection, including VAT collection; (ii) ensuring that tax authorities have full and meaningful access to central registers of beneficial ownership for both companies and trusts, and that those registers are properly maintained and verified.

A 'Follow-up to ECON/TAXE recommendations on corporate tax policies and tax rulings' was attached to the report by the Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE 2) of 29 June 2016. The 13 December 2017  resolution on recommendation prepared by the PANA committee of inquiry and resolution of 26 March 2019 on financial crimes, tax evasion and tax avoidance (TAX3) review actions to be taken. Altogether, the resolutions show that progress has been achieved since the beginning of the term that still needs to be implemented, monitored and then assessed. 

A number of the recommendations correspond to measures that are part of Commission packages, some of which have been adopted in the meantime. This is the case in particular for the two legislative proposals in the anti-tax-avoidance package on the CBCR to public authorities and the anti-tax-avoidance measures, both now adopted (see specific carriages). A proposal relating to public CBCR was presented on 12 April 2016. The re-launch of the CCCTB is the central element of the corporate reform package adopted by the European Commission on 25 October 2016; it includes a proposal on a common corporate tax base (CCTB) and a proposal on a common consolidated corporate tax base (CCCTB) (see separate carriages). With regard to tax havens, action to be taken to establish a list, and a Commission communication on an external strategy for effective taxation and a recommendation on tax treaties, were parts of the tax-avoidance package (see specific carriages), which also included a study on 'structures of aggressive tax planning and indicators'. Another modification to the directive on administrative cooperation was adopted by the Council on 25 May 2018, which provides for a mandatory exchange of information in the field of taxation in relation to reportable cross-border arrangements (see separate carriage). On 4 October 2017, a ‘Communication on the follow-up to the Action Plan on VAT’ was adopted together with proposals relating to the definitive VAT regime for cross-border trade, and another one was adopted on 30 November 2017, and four proposals complementing  the review were adopted in 2018 (see separate carriages). On 15 January 2019, the European Commission presented a communication on how to move gradually from unanimity voting to the ordinary legislative procedure.  

References:

Author: Cécile Remeur, Members' Research Service, legislative-train@europarl.europa.eu

As of 20/11/2019.