On 18 June 2020, a vast majority of the European Parliament voted in favour of a permanent sub-committee on the topic of tax fraud, tax evasion and tax avoidance. On the same day, the US announced their exit from OECD negotiations on a digital tax.
With an overwhelming majority of 613 votes for, only 67 votes against and eight abstentions, the fight for tax justice is now firmly established in the work of the European Parliament. A new 30-member-strong sub-committee shall do ongoing work in the fight against tax fraud, tax evasion and tax avoidance, as well as on financial transparency for taxation purposes. The European Parliament will be able to build on the successful work of previous legislative periods. Within the framework of the TAX3 special committee and the inquiry committee into the Panama Papers, MEPS committed themselves time and time again to tax justice and to put a stop to unsolidary profit shifting of large companies. In their final report, the members of the TAX3 Committee 2019 demanded a Common Consolidated Corporate Tax Base, fair taxation for the digital economy and the abolition of the Council’s principle of unanimity. Due to the latter, the important tool of public country-by-country reporting had been blocked in November 2019. Following the failure of the digital tax at EU level, many hopes had been placed on the OECD negotiations on regulating profit taxation of internationally operating companies without physical presence (Pillar 1) and a global minimum tax rate (Pillar 2).
USA pull out of OECD negotiations
The timing for a clear European parliamentary engagement in respect of the issue of tax justice could not be more suitable, as the negotiations at OECD level suffered a significant setback on the same day: the US announced their intention to put their participation in negotiations, aiming at adjusting the international tax system to the reality of the 21st century, on hold for the time being. The reason is obvious: the US want to avoid any "additional tax burden" of US-based but globally operating digital corporations such as Facebook, Google, Amazon or Apple. Even if official sources talk of a "pause" instead of an exit of negotiations, the Trump administration once again shows that it is not a reliable partner of Europe. France has already been forced to experience the latter, when the already implemented digital tax had to be suspended due to looming US tariffs on French imports – an approach, which US Secretary of the Treasury Steven Mnuchin also threatens to impose on other national digital taxes. This obviously upset his French colleague, Bruno Le Maire, who called the exit of the US a "provocation to all citizens of the planet" and announced his intention to reintroduce the French digital tax. Together with Spain, Italy and Great Britain, France campaigned in a letter for further negotiations with the US, as a solution had already been within reach. Paolo Gentiloni, Commissioner for Economy, too regretted the blockade by the US; however, he stood by the established roadmap. According to this, the EU will present its own proposal on taxing digital corporations next year, should no agreement be found at OECD level by the end of this year.
Europe pushes for a digital tax
According to the FT, US Secretary of the Treasury Steven Mnuchin advised that this was a time when governments should “focus on responding to the Covid-19 pandemic and safely reopening their economies”. In view of the enormous financial efforts, which the EU and Member States have to make for the recovery of the European economy, particularly now, revenue from the long overdue taxation of tech-companies would come in very handy. While SMEs and family-owned business are brought down to their knees, it is Amazon of all corporations that is the big profiteer of the Coronavirus crisis – in spite of anti-trade unionism, poor working conditions and inadequate protection of their employees during the Coronavirus pandemic. Trade unionists of UNI Europe and UNI Global are also urging for the fair taxation of Amazon and implore the EU to use the “historic opportunity”.