Commissioner Moscovici debates corporate taxation with MEPs

On Wednesday, the Commissioner for Economic and Financial Affairs, Taxation and Customs discussed the recently launched corporate tax package in the European Parliament.

By Christopher Ball

18 Feb 2016

Peter Simon (S&D, DE) welcomed the Commissioner and noted that the last meeting took place on January 11th. The focus today should be on the different elements of the anti-tax avoidance package from late January. The package was a step in the right direction and it followed some of the recommendations of the Parliament. However, this must not be the end of the story. What else does the Commission intend to do? He noted that Rosati would do the report on the exchange of information and Hugues Bayet would do the report on the anti-BEPs initiative. He asked how the Commission expects the Council to proceed on these files and on the two non-legislative files.

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, began by saying that this is his third meeting with the Parliament this week. It is very important for him to have a real dialogue with the Parliament. The package is a major step forward in the fight against tax avoidance – it is a game changer, but the battle must continue as people are always looking to find weaknesses to exploit in the system.  The Commission package is an attempt to score a few points in the game. The Parliament and the Commission share the same goal of preventing multinationals of avoiding tax legislation to pay little or no tax placing a proportionally unfair burden on normal companies that follow the rules. The package is based on four areas:

The real position of companies – tax must be paid where profits are generated. This is a very basic concept that has been ignored. The question is to work out how to make progress. The directive looks at the most unfair practices and target them. There are three basic systems:

  1. Hybrid instruments which try to exploit differences in legislation
  2. Foreign companies basing themselves in a certain jurisdiction
  3. Only paying tax on money transferred

He explained that the Commission is looking at preventing unfair tax rulings and preventing tax shopping. This is difficult as some member states would like to protect their national competence and this is why the Commission chose a recommendation. He noted that the ball is very much in the court of the member states. Certain member states have sought to move forward with BEPS first, but he is opposed to this as the internal market requires more.

Transparency – the EU is moving closer to country by country reporting and there will be automatic exchange of information between the member states. He accepted that some would like to make country by country reports public. He would also like this, but he would prefer to start with the transposition of what has been adopted. There will then be an impact study to decide what information should be made public. A consultation is ongoing on this. Some information on companies must remain confidential.

Healthy fair tax competition between SMEs and multinationals – the illegal and unfair practices of companies that seek to avoid tax must be ended. This creates a tax burden for SMEs of up to 30 percent more than multinationals. The Commission proposes to set up fair tax competition between member states by protecting their tax base. Anti-tax avoidance measures in some member states is undone by the actions of other member states. He argued that competition must be fair and not an anti-cooperation type gain.

Linking the EU and the global systems – The EU wants a global response to a global problem. The new external strategy envisages greater cooperation with international partners and the Commission will work to promote good tax governance. There will be a European list of uncooperative third countries. The Commission is looking at the criteria for this and he hopes to have something by Summer.

The Commission wants to put forward coordinated measures that ensure that those companies who play by the rules benefit. The EU can be a global leader in this respect. In the Council, technical debate has already begun. The Presidency wants to move forward quickly on these files. He stressed the need to keep the package together. Acting only on BEPS will be insufficient, he warned.

He then said that he would like to see the Parliament maintain political pressure. On the TAXE/ECON resolutions, he said that he hopes to come back with a point by point analysis of what the Commission is planning to do.

Allain Lamassoure (EPP, FR) welcomed the cooperation from the Commission and the increased transparency of documents.

Pablo Zalba Bidegain (EPP, ES) noted that the Commission and Parliament do indeed have shared objectives. He welcomed the proposals and stressed the importance of moving forward with them. This is an opportunity to make tax fair in the Eurozone and this is especially important given the need to cut expenditure. He said that it is important to know what is happening in the Council. He asked how far he believes the Council can go. On international cooperation, he agreed on its importance and he asked what position the US has.

Commissioner Moscovici responded by saying that relations with the Council are positive and this has helped move the debate forward. The initial debate in Council was positive and the Presidency has made it a top priority. However, sometimes there is not a global agreement in the Council and this could lead to an unpicking of the agreement. He warned that this must be avoided. The member states must realise that the Commission will stand firm with the Parliament behind them. On the question of the USA, he said that exchanges with the US Treasury shows a desire to make some progress on their part too, even if there are occasional differences. The G20 will also continue to discuss this.

Elisa Ferreira (S&D, PT) noted that the country by country recommendations (CBCR) will soon be submitted. These often address national tax issues, but they could also look at practices that distort competition. They could also look at macro-economic imbalances. Will these elements be integrated into the European Semester? She then called for tax administrations to be ring-fenced from budget cuts. 

Commissioner Moscovici responded by saying that the CBCR will look at tax evasion. This will be discussed by the College next week. He said that public opinion is behind these proposals and this should be realised. On the protection of tax administrations, he said that this could be a possibility further down the line. 

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