Outdated tax regulations, as well as loopholes and a lack of transparency resulting from it enable multinational corporations to avoid or evade taxes by complex company structures. Even experts understanding these structures is not an easy task struggle. An event organised by the European Trade Union Institute (ETUI) on the subject of sustainable corporate taxation addressed this problem.
The event gathered trade union tax experts from the Member States with the aim to better understand corporate strategies of profit shifting, i.e. tax avoidance and tax evasion and to strengthen trade union expertise. Also participating were the European Workers' Participation Competence Centre, (EWPCC), which is also part of ETUI and the Trade Union Advisory Committee to the OECD (TUAC). The AK was represented by tax expert Martin Saringer.
Trade union demands to the OECD
Séverine Picard, TUAC, commented that the employer side was far more active concerning the OECD Initiative on reducing BEPS (Base Erosion and Profit Shifting) than the trade unions. The BEPS Initiative was generally to be welcomed, since the proposed second pillar providing for minimum tax rate with the participation of 135 States - would put an end to the tax competition between countries. Both AK and TUAC support the so-called “Unitary Taxation”, based on which multinational companies have to be treated as one company. This would prevent multinational companies shifting their profits with the help of subsidiaries to low tax countries or tax havens to reduce the tax burden for the entire corporation. Currently, the same company is able to negotiate ‘with itself’ based on transfer prices on the basis of the so-called “arm’s-length principle”. It would be fairer to ascertain profits at the level of the entire company and to re-allocate them to the locations in accordance with their economic activities.
Debate on the OECD approach and taxation of digital companies
The economist Johannes Becker and the S&D Advisor on tax issues, Aurore Chardonnet, explained the developments at OECD level with regard to the urgently required new regulations on the taxation of digital companies. Even though, according to Becker, a minimum tax rate of 12.5 %, which is equivalent to the Irish corporate tax rate, was low, it would nevertheless be sensible as it would freeze tax competition (“race-to-the-bottom”) in respect of corporate tax rates. The S&D faction is currently demanding a minimum tax rate of 18 %. Aurore Chardonnet criticised the Council’s principle of unanimity, which would make blockades by European tax havens possible. Similar to the AK, she also urged - independent of the OECD proposals on the taxation of the digital core - for the implementation of the Common Consolidated Corporate Tax Base in combination with a minimum tax rate in the European Union. It was essential for civil society and trade unions to continue to build up pressure.
Lack of transparency weakens employees
The dense network of branches with the aim of profit shifting is quite often hard to understand. It also weakens employees, as these don’t know where decisions are made and because their rights to information and consultation are severely restricted. In order to understand this complex information one would need an expansion of the transparency rules (Public country-by-country reporting) and appropriate training for labour representatives. Toufik Saada of the expert group Syndex, demonstrated by the example of the Euro Disney Group, which operates Disneyland in Paris, how intransparent corporate networks impact the situation of employees. Euro Disney is debt-financed by the parent company in the USA, the Disney Group and therefore does not generate - at least on paper - any taxable profits in France. The 15,000 employees are only paid the French minimum wage and are palmed off with insignificant additional payments. For this reason too, trade unions are demanding the disclosure of company turnover and profit.
Council blocks public country-by-country reporting
A significant step would have been the public country-by-Country-Reporting. On Thursday, an important vote on this draft Directive took place in the Competitiveness Council. Whilst it was clear that tax havens such as Ireland and Luxembourg, but also Austria were likely to vote against, it was the German vote that mattered. However, Germany abstained, which means that no qualified majority was reached. Thereby an important instrument in the fight against tax avoidance will not come into force.