MEPs put forward corporate tax reforms

28 Oct 15

Multinational companies operating in the European Union should pay taxes where their profits are made, according to suggested corporate tax reforms agreed by a special committee of MEPs.

The European Parliament’s Special Committee on Tax Rulings yesterday finalised its recommendations towards fairer and more transparent corporate taxation in Europe.

The suggestions were contained in a report put together by two Special Committee members over an eight-month period. Their recommendations were backed by 34 votes to 3, with 7 abstentions.

Aside from loss of public income, the committee considers it unfair that large companies pay hardly any taxes on their profits while citizens and small and medium-sized businesses have to pay their full share.

The report advocates introducing country-by-country reporting for multinational companies on financial data such as profits made, taxes paid and subsidies received.

It suggests that this information should be systematically shared, along with national tax rulings and other tax information that has an impact on other member states.

A deal between member states and the parliament’s Economic and Monetary Affairs Committee earlier this month further watered down a European Commission directive to make certain information sharing on tax rulings mandatory between member states.

This deal was criticised by German MEP Markus Ferber, a member of the Special Committee, as a “missed opportunity” to improve transparency.

The deal excluded the European Commission from information sharing, which yesterday’s report insists is essential to it fulfilling its role as overall watchdog.

Recent commission rulings that illegal state aid was granted to Starbucks and Fiat Finance were cited as proof of the need for a stronger commission role, and the committee said that national parliaments should also work to hold governments to account on such issues.

The Special Committee’s report underlined the need to introduce clearer definitions of factors that determine tax bills, such as “economic substance”, and to reach common agreements on what is allowed in terms of tax rulings and how transactions are valued within the same company (advanced transfer pricing agreements).

It said this was best achieved at EU level by a compulsory, EU-wide set of rules that companies operating within the bloc could use to calculate their taxable profits.

This was the best way to put an end to preferential tax regimes, mismatches between national tax systems and the issues leading to tax base erosion at the EU level.

The report will now be put to a vote in the European Parliament in the last week of November, where it will be decided how best to follow up on the recommendations.

Ahead of this, multinationals will have a final opportunity to make representations to the Special Committee during a hearing scheduled for 16 November. 


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