EU re­launches am­bi­tious cor­po­rate tax re­form

Kuwait Times - - BUSINESS -

The Euro­pean Com­mis­sion yes­ter­day re­launched an am­bi­tious cor­po­rate tax re­form pack­age it says will boost the econ­omy and re­duce abuses af­ter a series of high-pro­file tax cheat­ing scan­dals sparked public up­roar. The Com­mis­sion, the ex­ec­u­tive arm of the Euro­pean Union, said that af­ter fail­ing in 2011 to win sup­port, it had lis­tened to mem­ber states and had now pro­duced a more busi­ness-friendly ver­sion.

“We are propos­ing a sys­tem which can si­mul­ta­ne­ously sup­port busi­ness, at­tract in­vestors, pro­mote growth and stop largescale tax avoid­ance,” EU Eco­nomic and Fi­nan­cial Af­fairs Com­mis­sioner Pierre Moscovici said in a state­ment. “My mes­sage to our mem­ber states to­day is this-Let’s seize this op­por­tu­nity, and quickly, to de­liver the fairer, more com­pet­i­tive, more growth-friendly cor­po­rate tax sys­tem that the EU needs,” Moscovici said.

The orig­i­nal pro­posal ran into strong op­po­si­tion from some mem­ber states, es­pe­cially Bri­tain, who ob­jected to Brus­sels hav­ing a say in tax mat­ters which are meant to be de­cided only by na­tional gov­ern­ments. Mem­ber states cur­rently set their own tax rates which vary quite widely across the 28-nation bloc.

The pro­posal also fanned sus­pi­cion that the Euro­pean Union wanted to stan­dard­ise the tax base as a pre­lude to win­ning the right to levy its own taxes to fund its ac­tiv­i­ties, a step seen by some as a step too far to­ward a fed­eral Europe. EU Vice-Pres­i­dent Valdis Dom­brovskis said “tax pol­icy should sup­port the EU’s goals of eco­nomic growth and so­cial jus­tice.”

“To­day’s pro­pos­als aim to boost growth and in­vest­ment, sup­port en­ter­prise and en­sure fair­ness,” he said in the state­ment with Moscovici.

Sin­gle tax re­turn

In a first step, the Com­mis­sion pro­poses set­ting up a Com­mon Con­sol­i­dated Cor­po­rate Tax Base (CCCTB), mean­ing that “com­pa­nies will for the first time have a sin­gle rule­book for cal­cu­lat­ing their tax­able prof­its through­out the EU.” This CCCTB sys­tem will be “manda­tory for large multi­na­tional groups which have the great­est capacity for ag­gres­sive tax plan­ning, making cer­tain that com­pa­nies with global rev­enues ex­ceed­ing 750 mil­lion eu­ros ($825 mil­lion) a year will be taxed where they re­ally make their prof­its.” It will also en­cour­age com­pa­nies to raise fund­ing by is­su­ing shares rather than via bank bor­row­ing, an im­por­tant change to Euro­pean busi­ness cul­ture.

The state­ment noted that tax rates are not men­tioned in the CCCTB as “these re­main an area of na­tional sovereignty.” “How­ever, the CCCTB will cre­ate a more trans­par­ent, ef­fi­cient and fair sys­tem for cal­cu­lat­ing the tax base of cross-border com­pa­nies, which will sub­stan­tially re­form cor­po­rate tax­a­tion through­out the EU,” it said.

The Com­mis­sion, which un­der for­mer Lux­em­bourg Pre­mier Jean-Claude Juncker prides it­self on tak­ing po­lit­i­cal ini­tia­tives, said com­pa­nies would now be able to file just one tax re­turn for all their EU ac­tiv­i­ties, sav­ing time and money. Juncker has made crack­ing down on tax cheats a high-pro­file pri­or­ity of his Com­mis­sion but he him­self has also been snagged by sev­eral cases in­volv­ing sweet­heart tax deals with ma­jor multi­na­tion­als ar­ranged dur­ing his time as Lux­em­bourg pre­mier.

The Com­mis­sion first raised the is­sue in 2001 and has worked over the years to try and con­vince mem­ber states. Moscovici said “a lot has changed” since 2011, ar­gu­ing that the CCCTB plan was “more rel­e­vant to­day than ever.” The lat­est CCCTB pro­pos­als will now be sub­mit­ted to the Euro­pean Par­lia­ment for dis­cus­sion. — AFP

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