Article – Corporate taxes: MEPs want to tackle tax avoidance by large companies
Europeans expect EU action to ensure multinationals pay fair taxes on EU soil, MEPs said during a plenary debate on 16 December.
The discussion centred on international efforts led by the Organisation for Economic Co-operation and Development (OECD) to modernise corporate tax rules in line with the challenges posed by globalisation and the digital revolution. MEPs will vote on a resolution on Wednesday 18 December.
It is no longer necessary to build factories, employ workers or even move goods across borders to earn money in a country as large companies rely increasingly on digital business models. However, current corporate tax rules make companies liable to taxation in a given country only if they have a physical presence there.
In addition, large companies often have subsidiaries in many places and can direct revenue to the jurisdictions with the lowest corporate tax rates. This, in turn, creates incentives for countries to offer them more advantageous tax conditions, in effect depriving other countries of tax revenue.
The negotiations under the OECD, involving 135 countries, seek to address the challenges of taxing companies with no physical presence, and to set a minimum tax rate to prevent damaging tax competition.
During the debate, many MEPs said that it was a matter of fairness to ensure multinational and digital companies contribute. “While citizens, consumers and small companies pay their share with effective tax rates of 40% or more, many large multinationals do not,” said Italian S&D member Irene Tinagli, chair of the economic affairs committee
Tinagli pointed out that according to research 40% of large companies’ profits are shifted to tax havens. “The current international fiscal regime [...] increases inequalities and puts most of the fiscal burden on less mobile tax payers - workers and consumers. This is simply not fair.”
Spanish Renew Europe member Luis Garicano quoted numbers showing that Apple paid €4 million in corporate taxes in Spain on an annual income of €320 million, while Netflix paid only €3,140. “How are we going to be financing our welfare states, if those who earn more, do not contribute to keeping the welfare state going?” he asked. “We are facing these challenges with rules from the 19th century.”
Looking for solutions at the international level
“When we are talking about the digital economy, we are looking at international challenges. We must therefore work on these challenges internationally,” said German EPP member Markus Ferber. He also pointed out that the EU should keep its own house in order. “We should solve our own problems within the EU [...]. We need to put an end to our own tax havens,” he said.
Economy commissioner Paolo Gentiloni said the EU was committed to finding an international agreement on this issue, but assured MEPs that the European Commission was ready to act in any case. “If no or limited agreement is reached internationally by 2020, it is crystal clear that the strong rationale for action at EU level will remain and that the Commission will act on this basis.”
Find out more
Latest News from
Rule of law in Poland and Hungary has worsened17/01/2020 12:05:00
The EU’s discussions with Poland and Hungary have not yet led these countries to realign with the EU’s founding values, Parliament warned on Thursday.
Parliament supports European Green Deal and pushes for even higher ambitions16/01/2020 15:25:00
MEPs support the European Green Deal, but highlight challenges, including ensuring a just and inclusive transition and the need for high interim targets.
Brexit: MEPs concerned about citizens' rights16/01/2020 13:25:00
Parliament highlights that assurances are needed on the protection of citizens’ rights to ensure its consent to the Withdrawal Agreement.
Meeting between President von der Leyen and Leo Varadkar, Taoiseach of Ireland16/01/2020 11:48:00
Remarks made at the joint press point (15 January 2020).
Trade/WTO: EU, U.S. and Japan agree on new ways to strengthen global rules on industrial subsidies15/01/2020 13:25:00
In a Joint Statement, representatives of the European Union, the United States and Japan announced their agreement to strengthen existing rules on industrial subsidies and condemned forced technology transfers practices.
EC steps up protection of European intellectual property in global markets10/01/2020 15:20:00
The EC has published the latest report on protection & enforcement of Intellectual Property Rights (IPR) in third countries. IPR infringements worldwide cost European firms €bns in lost revenue and put thousands of jobs at risk. The report identifies three groups of countries on which the EU will focus its action.
Speech by President von der Leyen at the LSE on 'Old friends, new beginnings: building another future for the EU-UK partnership'09/01/2020 12:10:00
In 1950, before our Union was formed, the UK, Italy and Germany were among the ten most populous countries in the world. Today, only one of those is in the top 20.
Eurojust becomes an Agency07/01/2020 12:05:00
Eurojust heralds a new phase in its development, as it officially becomes the European Agency for Criminal Justice Cooperation, with the application of the Eurojust Regulation as the new legal basis.
ESMA extends recognition decisions for 3 UK CCPs in the event of a no-deal Brexit24/12/2019 10:25:00
The European Securities and Markets Authority (ESMA) has announced that it has extended the recognition decisions for the 3 central counterparties (CCPs) established in the UK to reflect the extension of the expiry date of the Implementing Decision (EU) 2018/2031 of the EC on the equivalence of the UK CCP legal framework.