Today the European Commission published its long-awaited Communication on Business Taxation for the 21st Century. 

In response, Tove Maria Ryding, Tax Coordinator at the European Network on Debt and Development (Eurodad), said: 

“Fixing our broken corporate tax system has never been more urgent and important. Corporate tax avoidance continues to cost us billions of Euros in lost tax income every year. We cannot fund recovery from the Covid-19 crisis unless we solve this problem.

“In the Communication on Business Taxation, the European Commission is making a commitment to implement any future outcome of the ongoing OECD corporate tax negotiations, as well as relaunching an updated and renamed version of their decade-old proposal for a fundamental reform of the corporate tax system in the EU. That is all well and good, but not a big game changer, and the key question is what the EU will do if the OECD agreement falls short and fails to ensure that multinational corporations pay their share of tax. In the past, the European Commission has taken the initiative to put new and sometimes bold ideas on the table, and that is a role they should continue to play.

“The Commission also flags their intention of linking the outcome of the OECD-led negotiations on a minimum corporate tax rate to the EU’s tax haven blacklist. However, it is important to note that the rules which have been proposed by the OECD favour richer countries at the expense of especially smaller developing countries. Developing countries should not be forced by the EU to follow rules which are not in their interest.

“The European Commission is constrained by the fact that decisions on tax require consensus among the EU Member States. This is a challenge – especially when several Member States, including for example Ireland and Luxembourg, continue to behave like tax havens. However, one important exception is in relation to transparency, which is an area where the EU can make decisions based on qualified majority. Right now, the Union is negotiating a new directive that will determine whether the public will be allowed to know how much tax multinational corporations are paying in each country where they are doing business. But unfortunately, there are a lot of attempts to water down the proposal and we are still not seeing the level of political ambition needed to get the transparency we need around multinational corporations and their tax payments.” 

Risk of additional loopholes

The Communication also includes ideas that can potentially be harmful. Ryding said:

“The Commission’s communication also includes some old ideas that we are skeptical towards, including a new tax incentive related to equity financing. While the Commission has promised to incorporate anti-abuse measures there is still a risk that such measures will lead to more loopholes and corporate tax avoidance.

“It is also risky that the Commission now recommends that businesses should be allowed to carry back their losses to previous tax years. If governments want to support companies, they should do that transparently through subsidies – not by opening up more loopholes in our corporate tax system”. 

ENDS

Media contact: Julia Ravenscroft, Communications Manager, Eurodad: +32 486356814/ [email protected]