Digital Taxation: An historic opportunity

Europe must rise to the occasion and turn action into words on tax justice, writes Damien Carême.
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By Damien Carême

Damien Carême (FR, Greens/EFA) is shadow rapporteur for Parliament’s report on a European Strategy for Hydrogen

10 Jun 2021

We are at a pivotal moment for tax justice. With US President Joe Biden’s recent proposals for a minimum global corporate tax rate of 21 percent, we have an historic opportunity to put an end to a major aspect of tax evasion.

The European Union still has to rise to the occasion. A gigantic reform of corporate taxation, on a global scale, is underway. Indeed, at OECD level, an agreement on a minimum rate and on the taxation of digital giants is near - finally. 

That would be great news and would mean that Google, Apple, Facebook, Amazon and Microsoft could finally be taxed properly. An absolutely necessary measure of justice when we know that it is the digital companies which have suffered the least from the crisis, but which continue to pay the least taxes.

“With US President Joe Biden’s recent proposals for a minimum global corporate tax rate of 21 percent, we have an historic opportunity to put an end to a major aspect of tax evasion. The European Union still has to rise to the occasion”

In the EU, these digital giants pay on average only nine percent in taxes, while the average nominal (theoretical) rate is 23 percent. UK media site, the Guardian, recently revealed that Amazon generated €44bn in sales revenue in Europe in 2020 but paid almost no tax on it through a financial package in Luxembourg. It is time to call an end to such injustice.

Such an agreement at a global level would also mean that a country could tax the profits made by a multinational in a subsidiary abroad, where those profits were not taxed in the other country, up to the agreed minimum (21 percent for example). The goal? To remove any incentives for multinationals to relocate subsidiaries and profits for the sole purpose of evading tax.

This would be very effective in combating the evasion of multinationals, when more than 40 percent of their profits are currently relocated in tax havens. This represents a shortfall for the States which exceeds €350bn per year, including €120bn for the European Union and €20bn for France. A huge financial windfall that we urgently need to recover, to finance our hospitals in particular, which are on the front line in the crisis we are currently living through.

I therefore welcome these advances at global level and I hope for an ambitious agreement as soon as possible. This is also what the resolution we worked on with my colleagues in the European Parliament - and which was adopted by a large majority in April - states. This legislation is sending a strong signal to the European Commission and to EU Member States. 

But that’s actually where the problem lies: with EU Member States and the Commission, which until recently, only timidly supported the US President’s ambition of a minimum rate of 21 percent, merely paying lip service to it.

This is not that surprising when we know that many European countries are at the heart of this tax theft, with 72 percent of multinational transfers going through the Netherlands, Luxembourg, Switzerland and the UK, according to figures from the NGO Tax Justice Network.

These countries often put forward the argument of ‘tax competition’ which must be faced, but the argument no longer holds when there is a minimum on a global level. There is therefore no excuse for not supporting the ambition of a 21 percent rate. No excuse for inaction. Only a lack of political will.

The problem is the same with the directive for the tax transparency of multinationals (country by country public reporting). Here again, it is the governments of Member States, foremost among which France, that are reluctant to adopt an ambitious law.

Worse still, it was revealed that, within the framework of the ongoing interinstitutional negotiations, France is defending red lines drawn up by lobbyists from Medef, the employers’ union.

“As representatives of citizens and of the general interest, we MEPs have done our part of the job. It’s up to others to do theirs now. The Europe of solidarity should no longer be an empty word. There is hope, let’s turn it into action”

By aligning with their position instead of defending the general interest, French Finance Minister Bruno Le Maire is transformed into a tax justice gravedigger, blocking an historic breakthrough for more fair and transparent taxation.

I have already called on the French government and European leaders to rise to the occasion and actively support the American ambition of a global rate of 21 percent. They should also adopt flawless legislation in favour of tax transparency for multinationals and unblock all the other tax harmonisation and justice files on the table at the European level; files already approved - and for a long time - by the European Parliament.

As representatives of citizens and of the general interest, we MEPs have done our part of the job. It’s up to others to do theirs now. The Europe of solidarity should no longer be an empty word. There is hope, let’s turn it into action.

Read the most recent articles written by Damien Carême - Making the case for green hydrogen

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