Juncker and Moscovici welcome global moves to combat tax avoidance

Written by William Louch on 7 October 2015 in News
News

The European Council and the OECD present measures to crackdown on tax avoidance.

As part of a global crackdown on corporate tax avoidance, European finance ministers (the Ecofin Council) have agreed on a directive aimed at improving tax transparency across EU member states.

The directive requires member states to exchange information on advance cross-border tax rulings. Under the terms, the European Commission will be able to develop a secure central directory of information accessible to all member states.

The move follows the Organisation for Economic Co-operation and Development (OECD) presenting its final package of measures for the "comprehensive, coherent and coordinated reform" of international tax regulations, ahead of the G20 summit later this month.


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Both moves demonstrate the urgency with which governments are attempting to tackle corporate tax avoidance - something the OECD estimates costs governments around €223bn a year.

The issue is of particular concern in the EU, as it has 28 different tax regimes operating within a single market.  

The measures have been well received by leading political figures from the Commission.

European Commission President Jean-Claude Juncker hailed the Ecofin agreement as, "a major step forward in our efforts to advance on tax coordination and tax harmonisation." He described the current corporate tax system as, "unjust and unfit for purpose" and guilty of creating, "unfair competition that is anathema to the principles of fair competition."

Pierre Moscovici, European economic and financial affairs, taxation and customs Commissioner, said, "This is a major step in combating aggressive tax planning, creating greater transparency in corporate taxation and in providing fairer competition for both businesses and consumers."

Once approved by all 28 member states, the EU's corporate tax reforms will work in conjunction with wider global measures introduced by the G20 and the OECD.

Like the EU directive, the OECD/G20 base erosion and profit shifting (BEPS) project is aimed at clamping down on multinational countries that take advantage of discrepancies in national tax systems, allowing them to pay tax on profits in countries where tax rates are significantly lower than those where the profit is generated.

The package, building on the 2013 G20/OECD BEPS action plan, is based around three key pillars. These are: introducing coherence in domestic rules affecting cross-border activities; reinforcing substance requirements in the existing international standards to ensure alignment of taxation with the location of economic activity and value creation; and improving transparency.

Moscovici has welcomed the package saying, "The OECD package published today, which identifies measures towards fairer and more effective corporate taxation worldwide, is a very important milestone towards greater transparency and efficiency."

The OECD reforms will be incorporated into bilateral tax agreements across the world. However, several key tenets of the report are not legally binding, putting no pressure on countries to comply.

This has prompted criticism that reform has not been comprehensive enough.

Commenting on the Council's proposed measures, S&D Group spokesperson on tax rulings Hugues Bayet, echoed these criticisms, saying, "In recent months, things have evolved in the right direction, but the Council has not gone far enough. We must remain vigilant and not be satisfied with measures that would be only cosmetic."

S&D Group spokeswoman on economic and monetary affairs, Elisa Ferreira added, "It is very regrettable that the Council has watered down the European Commission's proposal. This proposal was already the absolute minimum in terms of transparency of the tax rulings and was incapable of coping with the magnitude of the LuxLeaks scandal."

About the author

William Louch is an editorial assistant for the Parliament Magazine

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