Preferential multinational tax agreements under fire – European Parliament
A European Parliamentary debate this afternoon discussed measures that would lead to the curtailing of tax evasion and avoidance.
A debate was sparked last year when it was revealed that Luxembourg had struck preferential multi-billion dollar tax deals with some of the world’s largest multinational corporations. This debate has been particularly heated in view of the extensive austerity and public spending cuts that have been imposed on countries suffering economic meltdown in recent years.
In light of the cut-backs in social benefits and public investment, a situation where multinational corporations are paying close to 1% tax rates in countries they have secret-deals with is particularly hard to stomach.
A large number of MEPs showed support with extending the mandate of the special committee on tax rulings, which looks into allegations that some Member States are using special tax regimes that favour large corporations. A large number also agreed with the finding of the committee’s report, stating that preferential multinational tax agreements place an unfair burden on SMEs and individual citizens.
The findings of the report relate to the re-launch the Common Consolidated Corporate Tax Base (CCCTB), which allows for taxes to be calculated on a common set of criteria, and is also a way of re-establishing the link between taxation and the place where profits are made. Other findings relate to ensuring effective taxation where profits are generated, implementing measures for a better tax environment for business, further progress on tax transparency and the use of EU tools for coordination.
“We do not want total tax harmonisation. We want corporate taxation based on common criteria,” said rapporteur and Socialist and Democrats Party MEP Elisa Ferreira.
A minority of MEPs argued that the findings of the report go against tax competition, which they said is necessary and healthy.
“Tax competition keeps tax rates low. We do not support the report because they point fingers at the Member States who are prepared to provide information on tax agreements, but the report goes against tax competition,” European Conservatives and Reformists Group MEP Sander Loones.
European Commissioner for Economic and Financial Affairs in his closing remarks said “Tax fairness is supported by political groups. We need to build the tax system for the 20th Century, which is something we have to do together. Implementation by Member States of the measures in the report needs to be ensured. Fighting taxing avoidance and evasion is one that needs to be tackled more broadly, involving not just the EU but also at a global level. At the very least there needs to be exchanging of information with the G20 countries. I will advocate the fast adoption of the CCCTB as this eliminates aggressive tax practices.”
A number of MEPs hit out at Commission President Jean-Claude Juncker, who was Prime Minister of Luxembourg for a number of years when unfairly preferential tax-agreements where implemented.
“President Juncker did not tell the truth in parliament, and defended taxation practices,” Confederal Group of the EU left – Nordic Green Left MEP Fabio Demasi said.
Harmonisation of taxes was a bone of contention for a number of MEPs, some arguing that the single market cannot function properly without being truly single, and other stating that taxation is a matter of national sovereignty and that freedom should not be limited.
Many also argued that with the current system of differential tax rates, the EU is promoting inter-state competition, making it easier for companies to pay less tax. It was also said that big companies are benefiting from this system, exploiting national system in order to avoid paying taxes in a legal way. This has led to some companies not paying any tax at all, at the expense of SMEs and private citizens.