(Bloomberg) Companies shouldn’t be able to get away with paying very low taxes—or none at all—in countries where they earn profits, EU Economic Affairs and Tax Commissioner Pierre Moscovici said as he introduced a
“The days are numbered for companies that aggressively reduce their tax bills,” Moscovici told reporters in Brussels ahead of Thursday’s announcement on the new measures. The commission has set a June goal for reaching political consensus on its proposals, which would require companies to share their country-by-country bills with tax authorities and would set minimum standards for EU nations when designing tax rules.
The plans offer legally binding measures to block common tax-dodging strategies, according to commission documents. The EU commission also seeks to improve transparency and create more fair conditions for companies across the EU.
“People have to trust that the tax rules apply equally to all individuals and businesses,” Commission Vice President Valdis Dombrovskis said.
The commission plans to offer additional proposals by May for countries to make public their country-by-country tax reports. Moscovici said this step is inevitable but may not be implemented for some time, depending on how negotiations proceed.
Moscovoci said the EU faces as much as 70 billion euros ($76 billion) in lost revenues from tax-skirting steps taken by big companies, or about five times what the bloc plans to spend on the refugee crisis in 2015 and 2016. Also as a result of this profit shifting, local EU businesses carry a 30 percent higher tax burden than multinationals, he said.
In Belgium, tax breaks for multinational corporations gave big firms an unfair advantage over their standalone competitors that “twists the playing field,” EU Competition Commissioner Margrethe Vestager said Jan. 22 in a VRT television interview. European state-aid authorities have ordered Belgium to claw back as much as 700 million euros in back taxes as a result of this tax arrangement, part of broader efforts to crack down on unfair tax breaks across the 28-nation bloc.
Selective Advantage
“What we’re trying to do is to show that no company is given a selective advantage which is not available to the next company,” Vestager said. “We’re in the process of analyzing that, because big as well as small member states shouldn’t do state aid to businesses like this.”
Thursday’s proposals seek to incorporate and build on last year’s report on the erosion of tax revenues and profit shifting from the Organization for Economic Cooperation and Development. Moscovici says he hasn’t yet received any complaints from the EU nations that don’t belong to the OECD.
Tax changes in the EU must be agreed on by all 28 member states and don’t require European Parliament approval. Moscovici said the parliament would be involved and consulted in talks as the measures advance, and a German member of the legislature said the EU needs to live up to its commitments.
On past tax proposals, “we have seen how member states have watered down the proposals substantially—this must not happen again,” Markus Ferber, vice-chairman of the Economic and Monetary Affairs Committee in the European Parliament, said in a statement.
“Large corporates dodging the European tax men by playing off national tax regimes against each other is something that hurts everyone’s sense of justice as well as public finances,” Ferber said. “New rules on exit taxation, hybrid mismatches and limits for the deductibility of loan interest must therefore be quickly implemented.”
—With assistance from Stephanie Bodoni and Julia Verlaine.
