MEPs unconvinced by commission's 'revolutionary' EU tax transparency proposals

Written by James O'Brien on 31 March 2015 in News
News

European economic and financial affairs, taxation and customs commissioner Pierre Moscovici has told parliamentarians his proposals would address 'immoral' tax practices.

The European commissioner was appearing before the first joint sitting of parliament's special committee on tax rulings and other measures similar in nature or effect (TAXE), and parliament's economic and monetary affairs committee (ECON).

The appearance follows the launch of the commission's tax transparency package, aimed at "tackling corporate tax avoidance and harmful tax competition in the EU".

Moscovici's package, which he described as a 'revolution', includes a legislative proposal to "improve cooperation between member states in terms of their cross-border tax rulings", something the commissioner hopes will herald "a new era of transparency".

"The US is leading the way on tax compliance and I want Europe to lead the way on tax rulings" - Pierre Moscovici

The former French finance minister also outlined to MEPs other initiatives including assessing the possibility of new transparency requirements for multinationals, reviewing the code of conduct on business taxation, and quantifying the scale of tax evasion and avoidance.

The taxation commissioner told MEPs that "differences and inconsistencies" in member state tax systems are something "we can no longer tolerate".

He described the system of competition driving member states to lower corporate tax rates as "unfair and immoral" and something that "only benefits the powerful". He said the scale of tax avoidance is making citizens not want to pay their tax, "something that is at the heart of the social contract".

Moscovici called for the creation of "a true single market for taxation" and said, "we have to ensure taxation systems serve the political priorities of the EU".

Moscovici said his proposals go further than the work of the organisation for economic cooperation and development's (OECD) base erosion and profit shifting (BEPS) project as they would have "a legislative remit".

Under BEPS, countries are "considering the spontaneous exchange of information on tax rulings that provide preferential tax treatment" but Moscovici believes this is "much more limited in scope" than the commission's automatic exchange proposal. He also emphasised to MEPs that OECD recommendations are not legally binding.

The commissioner added that "the US is leading the way on tax compliance and I want Europe to lead the way on tax rulings".

A tax ruling is "a confirmation or assurance that tax authorities give to taxpayers on how their tax will be calculated". They usually apply to large complex commercial transactions and in a cross-border context "can influence the allocation of taxable profits between subsidiaries located in different countries". At present it is unclear how many countries have tax rulings or how many have been issued.

"[Rules on information exchange] have been in place for 38 years and the commission has done nothing"- Fabio De Masi, GUE/NGL

Moscovici said that the automatic exchange of information, the "central plank" of the proposal, would enable a "crackdown on 'sweetheart' deals". The commissioner conceded he did not know how member states would react to this proposal but said it was for their benefit.

Mixed reaction from MEPs

Some parliamentarians expressed scepticism about the commission's tax transparency proposals. GUE/NGL ECON committee member Fabio De Masi highlighted that rules on the spontaneous exchange of information "have been in place for 38 years and the commission has done nothing".

He added that "we simply don't trust finance ministers to not cover things up, as they have done in the past" and cited the example of the Lagarde list.

The Lagarde list refers to a document containing a list of 2000 potential tax evaders with undeclared Swiss bank accounts handed to Greek authorities in 2010 by the former French finance minister and current international monetary fund director Christine Lagarde. The list came to light following its publication by the Greek media.

In response to De Masi, Moscovici said, "we trust finance ministers because they are democratically elected".

Molly Scott Cato, a Greens/EFA member of the ECON committee, said the commission's past record "undermines" its proposals, which should be "more about rules, fines and enforcement".

She also queried why the commission failed to launch infringement proceedings against Belgium following its admission it did not comply with existing exchange of information requirements. Moscovici responded that there was "not enough proof" to take the matter further.

Moscovici told EPP ECON member Georgios Kyrtsos that his proposals had an "ethical dimension" and reassured the Greek MEP that, "we don't want to cause entrepreneurial activity to decrease".

Anneliese Dodds, an S&D member of the TAXE committee, called for "country-by-country reporting of profits for multinationals" but welcomed the French commissioner's call for the introduction of a common consolidated corporate tax base (CCCTB).

Moscovici outlined that CCCTB was "essential […] and maybe member states are more mature now". The proposal has confronted staunch opposition from a number of states, including the UK, Czech Republic, Ireland, Latvia, Lithuania and Malta.

Moscovici wants member states to agree on the tax rulings proposal by the end of this year, so it can enter into force from January 2016. The commissioner intends to bring forward an action plan on corporate taxation before the Summer.

 

About the author

James O'Brien is a journalist and editorial assistant at the Parliament Magazine

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