EU commissioner says firms should pay taxes where they earn profits

TOULOUSE, FRANCE: The EU’s top economic affairs official said that companies should pay taxes where they earn profits, days after a report of another firm using aggressive strategies to lower their bill.

When asked about a report that the world’s top furniture company Ikea may have underpaid taxes by one billion euros using aggressive tax strategies, Pierre Moscovici said “a company should pay taxes where they generate profits”.

The EU’s economy commissioner told journalists during a visit to the southern French city of Toulouse that “we’ve had enough of multinational firms benefitting from this or that favourable rule ... to avoid paying tax where they did business to pay little in taxes in countries where the rates are low.”

He declined to name any company.

But the Green/EFA group in the European Parliament said at the weekend it had commissioned research that shows Ikea “structured itself to dodge 1 billion euros in taxes over the last six years using onshore European tax havens”.

Responding to the report the European Commission said on Saturday it would examine the claims, while Ikea defended its management of its tax affairs.

Moscovici announced last month a raft of measures to combattaxavoidance,inaddition to EU investigations under way into the tax deals of major groups such as Apple, Starbucks and McDonald’s.

The measures from the European Commission call for big companies to be obliged to report profit country by country – a break with the previous practice that allowed multinationals to secretly shift revenue across borders to save on tax.

Another requirement will compel nations to agree on minimum standards for drawing up tax rules, so that multinationals stop the practice of shopping around for loopholes to avoid paying tax altogether.

The initiative comes amid growing public outrage about tax avoidance by multinational corporations.

Last month Google agreed to pay £130 million (US$185.4 million, 172 million euros) in back taxes to Britain after a scathing government inquiry into the search giant’s tax arrangements.

Finance minister George Osborne hailed the agreement as a victory but the sum provoked a barrage of criticism for being too low. — AFP

Moscovici noted that small and medium-sized businesses “pay on average 30 per cent more in corporate taxes than multinationals. That can’t, shouldn’t continue.” — AFP