European Commission to draft EU-wide corporate tax laws

23 Sep 16

The European Commission is to publish a draft law setting out EU-wide rules on how companies calculate their tax dues, according to the bloc’s most senior tax official.

Pierre Moscovici, European commissioner for economic and financial affairs, said draft plans for the long-stalled common consolidated corporate tax base could be expected in late October or early November.

A common EU-wide tax regime, stipulating how businesses should report their profits and calculate their tax, could close the cross-border loopholes companies exploit to avoid paying their dues in full. 

The CCTB was first proposed in 2011, but momentum fizzled out largely because the idea was blocked by the UK and Ireland, among others.

The re-launched version will differ from its predecessor in that it will be mandatory, at least for multinationals, rather than voluntary.

Moscovici said the commission now felt able to reintroduce the idea because they have a “strong asset that was not present five years ago”.

“It is the mood in the public and the scandals, which give us some strength. Clearly today the public cannot stand the multinationals that do not pay their fair share of taxes, while ordinary citizens did in order to reduce deficits.”

Charlie Matthews, head of advocacy at ActionAid, welcomed the proposals. But she said any new law must prevent companies from shifting losses as well as profits, or risk opening another “major loophole”.

Moscovici set the deadline for the draft CCTB while speaking in an interview this week with the UK’s Guardian newspaper and Germany’s Süddeutsche Zeitung, among others.  

On Wednesday, the Guardian and Süddeutsche Zeitung broke stories generated from a new cache of leaked files exposing how the world’s rich and powerful use secretive offshore tax structures to hide their identity and protect their wealth and assets from tax.

The most recent leaks, relating to 175,000 secret companies incorporated in the Bahamas, follows a string of other high profile, international tax scandals, such as the Panama Papers.

The commission has also launched a number of investigations into global firms like Amazon, Starbucks and Apple, the latter of which resulted in Apple being ordered to repay €13bn ($14.5) in back taxes – the largest tax penalty ever handed down by the commission.

The Apple, Starbucks and Amazon cases were all pursued as breaches of state aid laws, which in the past has not been used to deal with tax matters.

Typically, state aid relates to elements of public investment in commercial businesses. Under EU rules, investments that give certain companies an undue advantage and distort the market are not permitted.

Yesterday, the commission found five public measures for local operations in Spain, Germany and Portugal did not constitute state aid because they did not affect trade between member states.

It said the decisions could be seen as guidance on what local public support measures do not constitute state aid, and under what conditions member states do not need to have their support assessed by the commission beforehand.

The cases related to local media, sports facilities, port infrastructure, social services for the elderly and support for the Valencian language in the Spanish press.

“These decisions confirm that many local public support measures do not constitute state aid,” said Margrethe Vestager, the EU’s competition commissioner. 

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