Brussels to announce measures against corporations’ ‘sweetheart’ tax deals

Politically incendiary proposals will set sights on multinationals’ tax planning with EU states and 30 worst offending havens could be officially blacklisted

Officials in Brussels will on Wednesday announce a series of measures designed to stamp out the toxic culture of secret, sweetheart tax deals for multinationals which prevails in a handful of EU member states and erodes tax receipts in other countries.

Among the expected measures is an official blacklist of 30 tax havens, a register of the worst-offending jurisdictions identified by all member states. It is expected to include many frequently cited offshore jurisdictions as well as some surprise additions and omissions.

Pierre Moscovici, the European commissioner for tax, will also announce a consultation on the extent to which big corporations’ most controversial tax arrangements should be made public — a key demand of many campaign groups.

This move would include forcing country-by-country disclosures of business activities, as well as potentially insisting multinationals publish details of the bespoke rulings they have secured from individual tax authorities.

In March the European commission set out plans to force member states’ tax offices to share such tax rulings with one another privately to help combat avoidance. Campaigners want such arrangements — through which multinationals receive comfort about the tax treatment of their most controversial affairs — to be public. Corporate interests are expected to lobby hard against this level of transparency.

At the heart of European commission proposals on Wednesday will be an outline of rules to standardise the way multinationals’ taxable profits are apportioned between countries — a framework referred to in tax jargon as the “common consolidated corporate tax base”, or CCCTB.

Despite being widely backed by tax policy technicians, however, CCCTB — an idea first put forward four years ago — remains politically incendiary because it is a harmonisation measure. As such, it is an anathema to Eurosceptics in the UK and elsewhere.

At present, the rules determining where multinationals’ taxable profits arise across Europe are found in a bewildering maze of bilateral tax treaties between EU member states. This treaty network is failing woefully, unable to cope with the toxic mix of ever more aggressive corporate tax planning and increasingly accommodating member states using tax policy to compete for inward investment.

Last year the LuxLeaks scandal exposed the industrial scale on which Luxembourg was awarding confidential tax rulings to some of the world’s largest corporations, effectively rubber-stamping structures designed to artificially depress groups’ tax bills in other countries.

Hundreds of companies saw their European tax antics exposed, including Skype, financial trading house Icap and drugs firm Shire.

In its defence, Luxembourg quickly pointed the finger at other jurisdictions — Belgium and Ireland among them — claiming they too offered attractive but confidential tax rulings in an effort to lure inward investment. Acknowledging as much, the commission in March admitted some member states had “contributed to, and encouraged, aggressive tax planning”.

Last year the commission launched a series of competition probes into some of the highest-profile tax rulings offered by member states. Ongoing investigations are examining whether certain rulings — including those offered by Ireland to Apple, Luxembourg to Amazon and the Netherlands to Starbucks — were so generous as to constitute illegal state aid.

Last month Treasury minister David Gauke appeared to get his rebuff to Moscovici in early, telling the FT: “The CCCTB has been around a very long time. It is a proposal still looking for a justification.”

The commission wants to push through CCCTB next year, but it is aware of likely opposition from countries such as Ireland and the UK. In order to make the proposal more politically palatable, Brussels is expected to suggest that that the “consolidated” element of the proposal be delayed in the hope this will kill accusations of a Brussels power-grab.

That would allow the officials to focus first on agreeing on a common methodology for apportioning taxable profits. Only later — and if there is the political appetite — would the commission look at a second phase, introducing single European tax returns for multinationals.

Commission officials are expected to emphasise that CCCTB, which is strongly supported by France and Germany, is designed to override many aspects of existing tax treaties and make for more effective taxation across the EU. They will stress it is in no way an attempt by Brussels to impose restrictions on member states’ sovereign powers to set tax rates.