The European Commission has announced that a comprehensive set of new rules is necessary to harmonise tax laws across the 28 member states, in order to thwart multinational companies’ aggressive tax practices, which allow them to avoid paying billions in tax every year.
The Anti Tax Avoidance Package (ATAP) put together by the commission asks EU countries to cooperate with one another and implement international standards as outlined by the OECD for tackling base erosion and profit shifting (BEPS).
“Billions of tax euros are lost every year to tax avoidance – money that could be used for public services like schools and hospitals or to boost jobs and growth”, said Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs. “Europeans and businesses that play fair end up paying higher taxes as a result. This is unacceptable and we are acting to tackle it. Today, we are taking a major step towards creating a level playing field for all our businesses, for fair and effective taxation for all Europeans.”
Billions of tax euros are lost every year to tax avoidance – money that could be used for public services like schools and hospitals or to boost jobs and growth
The proposal calls for countries to adopt legally binding measures that will stop multinationals from using common tax planning methods that currently allow them to avoid paying their fair share. It also advises member states to share tax information with one another about multinationals that operate within the EU.
“Today, we are taking another step to strengthen confidence in the entire tax system, making it fairer and more efficient”, said vice-president Valdis Dombrovskis, who is responsible for the euro and social dialogue. “People have to trust that the tax rules apply equally to all individuals and businesses. Companies must pay their fair share of taxes, where their actual economic activity is taking place. Europe can be a global leader in tackling tax avoidance. This requires coordinated European action, avoiding a situation of 28 different approaches in 28 member states.”
The commission is hoping that the implementation of the measures put forward in their ATAP will hinder aggressive tax planning practices from large multinationals by increasing transparency between member states. But, experts want that the current plan is insufficient, and may not provide the levels of transparency required to force corporations to pay their fair share.
Experts want that the current plan is insufficient, and may not provide the levels of transparency required to force corporations to pay their fair share
“This package is woefully inadequate to stem the tsunami of scandalous cases of multinational corporations failing to pay their taxes”, said Tove Ryding, tax justice coordinator at the European Network on Debt and Development (Eurodad). “A crucial first step to making a real difference would be for multinationals to publicly report where they make their profits and where they pay their taxes. Instead, the European Commission is presenting a package on how to introduce secret reporting that keeps parliamentarians, journalists and the general public in the dark. Commissioner Moscovici recently announced that this would be the year of corporate tax reform and fiscal transparency. Time for the commission to take much more ambitious action and bring an end to multinational tax dodging.”