EU Directives against tax avoidance in need of improvementIn order to avoid taxes, multinational companies like to hide behind complicated elaborate constructions, which consist of an intricate network of several subsidiaries, holdings, foundations and other legal forms – all of it completely within the law. A new EU Directive shall now at least bring transparency to these structures. The country-related breakdown of corporate profits shall clearly show in which countries a company generates how much profit.
Aggressive tax planning and avoidance by companies cost states billions; money, which is urgently needed for investments: in the education sector, in the health system, in infrastructure projects. Hence, a Commission proposal has been on the table for quite some time: the so-called Country-by-Country-Reporting, - country-specific reporting - shall make profit shifting methods transparent. However, from the AK's point of view there is still plenty of room for improvement:
Instead of restricting the Directive to groups generating a net turnover of more than 750 million euros, a proposal, which is currently debated in the European Parliament, demands, analogous to accountability, to reduce the amount to 40 million euros. The AK supports this proposal. In order to create transparency, it is also necessary for companies to publish country-specific data for each individual state, in which they operate.
The current proposal is an important step towards more transparency. In order to effectively combat tax avoidance and tax evasion in connection with tax havens, the AK also demands that details of ownership resp. the actual beneficiaries of these companies and other legal structures must also be disclosed.
An important point to achieve tax justice is that companies have to pay tax on their profits where they generated them. The plan for a Common Consolidated Corporate Tax Base for the entire EU points towards this direction. However, here too, in spite of a primarily positive assessment, the AK sees some points of criticism. For example, the Directive proposals do not provide for a minimum tax rate for corporation tax. However, apart from the Common Consolidated Corporate Tax Base, a minimum tax rate is an indispensable prerequisite to successfully combat the tax avoidance strategies adopted by multinational companies.
Meanwhile, the European Parliament continues to work on investigating on the Panama Papers, even if the especially set up enquiry committee is confronted with obstacles. MEP Evelyn Regner, S&D, criticises the inadequate interest in the fight against tax evasion: “There is still a lack of transparency, when it comes to finding out where cash flows come from and where they go. It is also particularly inacceptable that the documents for the Panama enquiry committee have either been blacked out or missing altogether.”
The confirmation of a verdict against whistleblower Antoine Deltour, who had been sentenced to six months on parole and a fine, has also caused a stir. His former colleague Raphaël Halet received a fine. By forwarding data to a journalist, Deltour and Halet made a major contribution to the uncovering of the scandal known as Lux Leaks. In particular in the tax sector, authorities are often dependent on information by companies to uncover dirty practices. Hence, the European Parliament has been demanding for quite some time to improve protection for informers.