(UPDATED 11/26/2014) The EU Parliament on November 25 overwhelmingly approved wide-ranging proposals to overhaul Europe’s international tax system offered by a special Parliament committee investigating multinational corporation tax avoidance.
The non-binding recommendations, prepared by co-rapporteurs Elisa Ferreira (S&D, PT) and Michael Theurer (ALDE, DE), were passed by the Parliament 508 votes to 108, with 85 abstentions.
Included are proposals for an EU-wide mandatory common consolidated corporate tax base, a common framework for tax rulings, uniform rules defining economic substance, mandatory country-by-country disclosures by MNEs that go beyond G20/OECD agreements, harmonized accounting standards, greater oversight of tax advisers, and more protection for tax whistleblowers.
The MEPs also said that the EU Commission should have access to all Member State tax rulings to allow them to be scrutinized for State aid violations and said that an EU Council political agreement reached last October that weakened a Commission proposal for automatic exchange of tax ruling information must be reversed.
Moreover, the MEPs said they oppose the modified neuxs approach for patent boxes and argued that the EU should adopt its own, objective, definition of tax havens to inform future EU tax haven lists. The OECD tax haven rules, based on criteria which refer to tax transparency and the exchange of information, and are not comprehensive enough to address harmful tax practices, they said.
The report lays much of the blame for multinational tax avoidance on unnamed EU States, which “adopt an ambivalent position regarding tax avoidance, complaining on the one hand about their national tax base erosion while at the same time being responsible for the design of the current national and international tax systems which made it possible, and still impeding any development of their tax systems towards a more coordinated solution.” The MEPs say that the unanimity requirement within the Council has prevented corporate tax reform.
The report also faults the EU Commission for not launching State aid investigations into Member State tax ruling practices sooner and for not taking action against States that failed to spontaneously exchange tax information with other States or meet other obligations.
The Committee, set up last February in response to the “Lux leaks” scandal, has held over dozen meetings on tax avoidance with various stakeholders, including EU Commission tax and competition officials, EU finance ministers, OECD representatives, and large multinationals. The report includes summaries of these meetings.
The EU Conference of Presidents will discuss tomorrow whether to allow the Committee’s work to continue, as its eight-month mandate has expired. There has been some been discussion of granting a six month extension to the body, but narrowing the scope of its inquiry, Greens MEP Sven Giegold said in a statement.
Narrowing the committee’s mandate would be “a slap in the face to European citizens and taxpayers who have a right to have this mass corporate tax avoidance scandal properly investigated,” Giegold said.
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UPDATE (11/26/2015): EU Parliament to establish new committee on tax rulings: The EU Conference of Presidents on November 26 decided to set up a six-month committee to follow up on the tax rulings committee’s work; the precise mandate of the new committee will be decided on Wednesday. See: Release.
UPDATE (12/02/2015): New EU Parliament tax committee will have same mandate as its predecessor: The European Parliament on December 2 voted to create a new committee to investigate tax rulings, specifying that the new committee will have the . . .
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