EU plans ‘revolution’ on sweetheart tax deals
New EU plans to force governments to send quarterly reports on tax rulings are a “revolutionary” step towards overcoming corporate secrecy, the bloc’s tax commissioner has said.
The blueprint published two weeks ago by the Commission would establish a system of automatic exchange of information on tax rulings and require national authorities to send each other short reports every three months. The current rules allow governments to refuse to exchange information.
Speaking on Monday (30 March) at a hearing of the European Parliament’s special committee on tax rulings, taxation commissioner Pierre Moscovici described the proposal as “a first step towards more transparent and fairer taxation in the EU”.
The Commission believes that creating more ‘peer pressure’ by requiring member states to be more transparent in their tax rulings would create a “virtuous circle” between states and companies. However, critics have complained that the new plan would not require controversial tax rulings to be published, meaning that the public will still remain in the dark.
The EU executive is currently investigating whether so-called ‘sweetheart’ tax agreements in Ireland, the Netherlands and Luxembourg, involving Apple, Starbucks and Fiat, constitute illegal subsidies.
The creation of the Parliament committee was prompted by the LuxLeaks scandal which indicated that a host of companies had benefited from a variety of tax avoidance schemes set up in Luxembourg while the current European Commission president, Jean-Claude Juncker, was prime minister.
In particular, Luxembourg’s tax regime allows companies to benefit from significant reductions to their tax rate on income earned from intellectual property.
The special committee will produce an own initiative report and a legislative report, but its terms of reference were weakened by the Parliament’s centrist political groups, meaning that it does not have the right to demand documents on tax rulings from individual governments.
Instead, a non-legislative report will examine fiscal practices across the bloc, accompanied by a proposal to the commission on tax evasion and tax avoidance.
The Commission is keen to update its rules on information exchange to include a new global standard put in place by the finance ministers from the G20 of industrial nations and the Paris-based OECD think tank. The annual exchange would include balances, interest, dividends, and sales proceeds from financial assets.
“We are in a crucial phase that calls for swift action that goes beyond the tax transparency package”, said Moscovici, adding that “we need tax fairness in the EU and we need a true single market for taxation.
But the EU executive’s actions are constrained by the EU treaties which stipulate that any common laws in the field of taxation must be agreed with the unanimous support of all 28 national governments.
