Interview: how the tax rulings committee came up with plans for a fairer system

Multinationals should pay their taxes where they make their profits, according to one of the recommendations by the tax rulings committee, which were adopted by MEPs on 25 November. Report authors Elisa Ferreira (S&D, Portugal) and Michael Theurer (ALDE, Germany) told us it had been difficult for the committee to get answers from multinationals and member states during its nine-month investigation, but that its recommendations could lead to fairer tax competition.

Getting multinationals to cooperate

The committee started its work in February 2015 and at first many large multinationals declined its invitation to explain their position regarding corporate taxation. However, this soon changed.

“They started by saying no: don’t even touch us, we have nothing to do with this issue,” said Ferreira. “But then one after the other, they all came and some of them said ‘yes’, we are in favour of some of your proposals’.” The companies giving statements to the committee included. Among others Amazon, Facebook, Google, IKEA and HSBC.

Probing member states for answers

The committee met officials in Belgium, Luxembourg, Switzerland, Ireland, Netherlands and the UK as part of its investigation. “We were very welcomed but the moment you go into details, secrecy is the name of the game,” said Ferreira.

Theurer added: “We could have done better, had there not been strong resistance from important actors, certain member states and the Commission. Thus we have not received a number of important documents, or many with information blacked out by the Code of Conduct group.”

The consequences of competing on taxes

Committee members also investigated the implications of current tax practices. Theurer said: “Aggressive tax planning by some EU countries has increased their national tax base at the expense of their European partners and with negative consequences for society as a whole. Tax shortfalls lead to tax increases for all other taxpayers, whether they are employees, self-employed, civil servants or companies.”

Ferreira commented: “We can’t leave corporate taxes in a framework that allows member states to compete in order to attract multinationals and make a business out of this.”

Next steps

MEPs adopted the committee report on 25 November with 508 votes in favour, 108 against and 85 abstentions. This puts pressure on other organisations such as the European Commission to act on its recommendations. Theurer called the adopted report “a high-quality analysis of the unfair, illegitimate and in parts illegal practices of tax evasion and avoidance by certain multinational companies.” He added: “It’s a milestone on the bumpy road to an efficient regulatory framework to enable fair tax competition within the social market economy.”

Fereira said: “I hope that the Lux Leaks scandal and the work of the tax rulings committee will be a game-changer in how we deal with the tax issues.”