Combatting tax avoidance – 2 steps forward, 3 steps back?

The fight against tax avoidance by large companies was the main subject of a discussion event held on 11 April 2017 in Brussels. New laws shall lay the foundations to ensure that companies pay their fair share of tax, which quite frequently is not the case today.

MEP Regner: Tax policy requires transparency

At the event, organized by AK and ÖGB, the Social Democrat MEP Evelyn Regner called for transparency in tax policy. When it came to taxation, this was necessary to achieve a fair sharing of the burden. Together with MEP Bayet, Regner is mainly responsible in EU Parliament for a report, which is to clearly represent companies’ turnover in every country. If it is up to the Social Democrat, this duty of a transparent country-wise representation of income, shall include all companies, which generate a turnover of € 40 million and above and not only starting at € 750 million, as was suggested by the European Commission.

In particular the Council is slowing down negotiations

Closely linked to this measure is the taxation of companies. Only once the amount of turnover generated by companies is known, it will be possible to tax them in individual EU Member States. Another instrument to come closer to the goal of tax fairness is the Commission’s plan of an EU-wide Common Consolidated Corporation Tax Base. According to Thomas Neale, the Commission had published corresponding proposals. An important issue, which had to be clarified, concerns the question whether in particular the proposal on country-by-country reporting should be treated as a tax issue. This would mean that negotiations had to take place in accordance with a legal basis, where the Council had to decide unanimously on the law. And with regard to the 28 EU Member states this would be an almost hopeless undertaking. Apart from that, EU Parliament would not be involved in the co-decision process in this case. According to Neale, that is why currently some Member States in the Council would slow down negotiations.

A large part of the tax revenue is generated by employees

The expert of the Chamber of Labour, Gertraud Lunzer, pointed out that the major share of direct tax revenue was generated by employees. This imbalance with regard to the tax burden was clear to see when one looked at data of Eurostat, the statistical office of the European Union. Hence, the AK supports the proposals by EU representative Regner, which would make an important contribution to end tax avoidance by multinationals.
The non-governmental organisation Oxfam has prepared a study, which explains to which extent banks are already involved in tax avoidance. Oxfam spokesperson Aurore Chardonnet describes how European financial institutions move their profits, declaring them in countries, where they do not employ a single bank clerk. Ireland would be one of these problem countries as some of the credit institutions located there would only pay 6 or 2 % tax.
Severe criticism was also voiced by Tove Maria Ryding of the European Network on Debt and Development Eurodad. In particular the Council would prevent or slow down progress. Ryding comes out in favour of public reporting with regard to banks. Tax avoidance was a global problem as the scandal concerning the Panama Papers had shown. Hence, the solution processes, which are currently sought at the level of OECD countries, are not sufficient. Ryding and all other participants are convinced that more transparency would make tax avoidance more difficult and ensure fairer competition.

Negotiations will still take a long time

The negotiations in the EU Parliament will continue over the coming weeks. One can only hope that reason will prevail and that there will be a majority of MEPs who support the necessary transparency to enable the enforcement of a fair tax policy. The Council too continues its negotiations. However, in its case it might prove far more difficult to achieve an agreement concerning more tax justice.