They had already been announced last summer; this week it finally happened. The Commission is finally presenting concrete proposals as to how to gain control of the increasingly more sophisticated tax avoidance practices of major multinational corporations.

European citizens and employees have been shaking their heads for quite some time: whilst they have to bear the full burden of the financial and economic crisis, which was only made possible due to deregulation and the failure to take adequate control measures at national and European level in the first place, the financial industry and multinational corporations are mobilising all forces to torpedo the necessary banking regulation and the implementation of a Europe-wide Financial Transaction Tax. With the assistance of tax consultancy firms and the finance ministries of quite a few Member States, the head offices of international corporations are trying day after day to improve “creative” ideas, as to how they could nudge their tax burden in Europe towards zero. According to a study of the European Parliament, the tax avoidance practices of these corporations, which are also applied at the expense of SMEs in Europe, which are not able to afford or get away with such tricks (the Commission estimates that “normal” business due to the tax avoidance by multinational corporations are paying up to 30% more tax), cost the European taxpayer between 50 and 70 billion EUR per annum. Money, which is urgently needed for investments, for boosting the economy and for tackling mass unemployment in Europe.

It was one of the key aspects announced by the Juncker Commission to put an end to this undesirable development, which is both damaging democracy and European policy. Already in June 2015, the Commission, building on important preliminary work of international organisations, such as the “Base Erosion and Profit Shifting (BEPS)” project of the OECD, had presented a relevant action plan. This week, the responsible French Commissioner Pierre Moscovici presented some of the initiatives from this action plan in detail in Brussels.

For example, the “Directive laying down rules against tax avoidance practices” which was presented today, introduces six concrete measures to combat the most widespread forms of aggressive tax tricks. The examples, explained in the documents, throw a distinctive light on the “creative” energy of multinational corporations. For instance, an insurance company, whose head office is registered in an EU Member State, has a reinsurance company as a subsidiary company in a country, where no or very little tax has to be paid. The parent company then transfers totally excessive premium payments to its own subsidiary. In doing so, it reduces its taxable profit in the EU country and benefits from the non-taxation in the low-tax country.

Also presented today, was an initiative to increase transparency, namely so-called “country-specific reports on the taxation behaviour of multinational corporations” (“country by country reporting”). In future, parent companies shall be obliged to report specific information (turnover, profit, paid taxes, number of employees etc.) in respect of the entire corporation, including its subsidiaries for all countries, in which they are economically active, to the tax authorities of the country, in which they have their registered head office. Starting in 2017, this information will then be automatically forwarded once a year to the tax authorities in all other countries, where the corporation is active. However, there is a crucial flaw: the public shall not have access to this information for the time being. In contrast to, for example the banking sector, the publication of these country-specific reports shall not be mandatory. The Commission is currently reviewing the situation and intends to make a decision by the spring of 2016, whether this should be changed.

Not presented today was the planned new version of the proposal for a Common Consolidated Corporate Tax Base (CCCTB); this will only be materialized later in 2016. Behind the non-word CCCTB lies the simple idea that the Member States should at last agree to a Europe-wide common tax base, on the basis of which corporations across the whole of Europe will be taxed. This would put a major stop to the confusing and uncontrolled growth of tax rules in 28 Member States, which almost invites to tax deferral and avoidance. However, so far the previous advances by the Commission in this direction have been successfully torpedoed by some Member States. Apart from and beyond the CCCTB, AK and trade unions another core demand is of central significance: the introduction of a common European minimum corporate tax rate to finally put an end to the tax competition race to the bottom, which is detrimental to all Member States and in particular to employees. However, even in the documents published today, this is still expressly rejected by the Commission, as ideologically the Commission still appears to be convinced that competition between Member States is beneficial when it comes to corporate taxes.

Further Information:

Topic page of the European Commission

Communication on the Anti-Tax Avoidance Package: Next steps towards delivering effective taxation and greater tax transparency in the EU and a working document of the Commission departments 

Directive laying down rules against tax avoidance practices

Proposal for Directive on the obligation to the automatic exchange of information in the field of taxation

Study of the Commission on Aggressive Tax Planning