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MEPs base their recommendations on the principle that multinational companies should pay their taxes where they make their profits. They feel that today’s corporate tax competition – prompting aggressive tax planning and evasion, without any agreed framework - is harmful Apart from the loss of public income, it is considered unfair that big companies pay hardly any taxes on their profits, whereas citizens and small and medium-sized firms have to pay their full share.
Country-by-country reporting, Common Corporate Tax Base
Committee members recommend introducing country-by-country reporting for multinational companies on financial data including profits made, taxes paid and subsidies received. They also advocate introducing clear definitions of “economic substance” and other determining factors of corporate tax bills.
Common agreement is also needed on what is allowed in terms of tax rulings and advanced ‘transfer pricing agreements’ (how transactions are valued within the same company). The best way to achieve this and put an end to preferential regimes, mismatches between national tax systems and also most of the issues leading to tax base erosion at European level is a compulsory EU wide common consolidated corporate tax base (CCCTB), which should be introduced as soon as possible, they say.
Transparency
MEPs urge EU member states to systematically share their national rulings and other tax information that has an impact on other member states. They insist that the European Commission should also receive this information, to enable it to play its proper role as competition watchdog to the full.
The Commission’s 21 October verdicts on tax rulings for Starbucks (NL) and Fiat Finance (LU) confirm the need for a stronger Commission role, say MEPs, who also point out that national parliaments should hold governments to account on rulings and other tax issues.
Reforming the Council's Code of Conduct Group on Taxation
MEPs feel that Council's Code of Coduct Group on Taxation - established by finance ministers in 1998 - has lost its political will to move things forward and thus its effectiveness. It would be better to upgrade the political involvement with deeper involvement of the European and national parliaments, they say.
Better protection for whistle-blowers
Whistle-blowers whose revelations promote the public interest should be better protected, say MEPs, noting that the “Luxleaks” revelations were made by investigative journalists, based on information provided by former 'Big Four' employee, Antoine Deltour, who now faces court charges in Luxembourg.
What’s next?
Multinationals have a last opportunity to contribute to the committee’s work on 16 November. The committee report will be put to a vote by Parliament as a whole in the last week of November in Strasbourg.
Related: Council deal on automatic exchange of tax rulings is a “missed opportunity”