Wolfgang Schäuble, German finance minister, and Michael Noonan, Irish finance minster, at a meeting of the Eurogroup, Brussels, July 07, 2014|
Germany, France and Italy have called on the European Commission to accelerate and expand reforms on special tax deals for multinational companies, saying the EU should adopt rules by the end of next year.
Jean-Claude Juncker, European Commission president, last month came under pressure for his role as prime minister of Luxembourg in the period 1995-2003, in facilitating the conversion of the Grand Duchy to a tax haven (see links below).
According to a joint letter by finance ministers Wolfgang Schäuble, Michel Sapin and Pier Carlo Padoan to the EU Commission, reform measures should go beyond greater transparency and company registries to a “general principle of effective taxation” to counter he EU’s lack of “tax harmonisation” which encourages companies to cherry-pick where they pay,
“Our citizens and our companies expect us to cope with tax avoidance and aggressive planning,” the ministers said in the proposal "obtained" by Bloomberg News and a copy of which has been "seen" by The Financial Times. “The diagnosis is made and the solutions are already known, so we should act without any delay.”
The letter calls for “stricter conditions and rules” for unilateral tax rulings, in a reference to Ireland, the Netherlands and Luxembourg: the Lux Leaks revealed that one civil servant had given over 340 tax rulings to cut tax on foreign-generated income to less than 1% in some cases.
Ireland, the Netherlands and Luxembourg are under investigation by the European Commission in connection with the implications for state aid rules of special tax deals for Apple, Starbucks, Amazon and Fiat Finance.
In their letter, they call for the EU to adopt “a set of common, binding rules on corporate taxation to curb tax competition and fight aggressive tax planning” and write that EU plans for exchange of tax information between member states do not go far enough. EU law “could do more on trusts, shell companies and other non-transparent entities” by establishing compulsory ownership registers, they state.
In addition they urge the commission to address specific loopholes linked to accounting for interest payments, royalty receipts and the connections between parent and subsidiary companies.
Jean-Claude Juncker promised last month that the commission will bring forward proposals on tax harmonisation soon and also introduce an exchange of information on tax rulings.
“Transparency is not enough. We can surely not concede that situations where treaty freedoms are misused in order to avoid tax remain unaddressed. For this reason, an [EU] anti-BEPS (Base Erosion and Profit shifting) directive should set a general principle of effective taxation,” the ministers write.
Ireland opposes tax harmonisation - pressure to change the headline rate of 12.5% is not expected - but transparency on tax rulings would also be a serious development.
The ministers warn: "The anti-BEPS directive will be an opportunity to fix this issue through countermeasures towards jurisdictions whose behaviour fosters non-transparency and aggressive tax planning.”
Related tax links
Germany and UK agree to restrict 'patent box' tax incentives to local R&D
Architect of tax "racket" to commit EU to fight against tax fraud
Hidden Taxes Report: Kenny denies Irish special Apple tax deal despite contrary "evidence"
Luxembourg Leaks: Irish Government's guff on tax system exposed; "Racket" needs to stop
Luxembourg confirmed as massive facilitator of tax avoidance
Bono struggling again as anti-poverty campaigner and tax avoider
Apple says it may have to pay Ireland back tax; Foreign tax rate at 4.4%
Double Irish tax scheme axed; Conventional wisdom wrong again - Part 1
Replacing the Double Irish with Knowledge Development / Patent Box - Part 2
Ireland's small gain from Apple's possible EU tax probe payment
European Commission: Apple given special tax deals by Ireland
Apple's foreign tax rate tumbled after 2007 Irish 'advanced opinion'
G20 finance ministers reaffirm commitment to tax reform; Ibec takes Finfacts' advice
OECD & Tax: Everything grand in Ireland's Republic of Spin?
OECD proposes biggest reform of global business tax rules since 1920s
Finfacts submission to Department of Finance consultation on corporation tax reform
OECD BEPS Project submission from Finfacts: Ireland should embrace corporate tax reform
Irish corporate tax policy like property bubble driven by short-term interests
IMF explains “Double Irish Dutch Sandwich” tax avoidance
US company profits per Irish employee at $970,000; Tax paid in Ireland at $25,000
Estonia heads OECD tax competitiveness index; Ireland at 15, US at 32