Eurozone’s big four demand measures against tax avoidance

The four biggest economies in the Eurozone – Germany, France, Italy, and Spain — demand an end to the erosion of their tax base by means of incorporation in states that facilitate tax avoidance.

According to the Financial Times, Bruno Le Maire, Wolfgang Schaeuble, Pier-Carlo Padoan, and Luis de Guindos, want a shift from taxation in the country of incorporation to taxation in the country of economic activity. The first step is a demand for an equalization tax, that is, a corporate tax top up in the country of incorporation to match the level of effective taxation in the country where economic activity is taking place.

Last week, Reuters reported that the EU 28 financial ministers would discuss the taxation of multinational digital platforms in Tallin on September 15-16. However, the scope of the discussion seems to be wider than Amazon, Uber, and Google.

This proposal is likely to be vehemently opposed by countries that have invested in “tax competition” or “avoidance” such as Ireland, the Netherlands, Luxembourg, and others. The proposal that the Estonian Presidency will outline this week is expected to be far more ambitious than the measures against tax avoidance proposed by the OECD in 2015 and will, in effect, be a blow to what is perceived as “tax competition.”