Read Commission’s lips: Pay more taxes

The EU launches a new ‘Action Plan’ aimed at businesses.

The European Commission is taking aim at corporate tax avoidance in the EU with a politically ambitious set of proposals it says would make it tougher for multinational companies to take advantage of legal loopholes.

The “Action Plan for Fair and Efficient Corporate Taxation in the EU,” introduced Wednesday in Brussels, comes in response to criticism that companies such as Apple and Amazon are earning big profits in the single market while taking advantage of Europe’s patchwork of national rules to pay little or no corporate tax.

“Citizens can no longer accept that some companies avoid paying taxes and some tax regimes promote that,” said Pierre Moscovici, the commissioner for economic and financial affairs, taxation and customs.

Among the key proposals is a relaunch of the Common Consolidated Corporate Tax Base. First proposed in 2011, the plan offers a single set of rules that cross-border companies could use to calculate their taxable profits in the EU, instead of having to deal with different national systems.

“Corporate taxation in the EU needs radical reform,” said Moscovici. “In the interests of growth, competitiveness and fairness, member states need to pull together and everyone must pay their fair share.”

Negotiations on the original common corporate tax base proposal from 2011 have been stalled, however, because it was too ambitious in terms of consolidation of rules. The new proposal, according to the Commission, has been adjusted to focus on areas where talks can move forward.

The whole taxation issue is a difficult one for the Commission, and the plan is careful to avoid proposing a “harmonization” of tax rates across all EU countries — a political non-starter.

But mounting public outcry over the issue of big companies avoiding taxes in the EU — illustrated most recently in the “Luxleaks” scandal involving special tax status given to companies in Luxembourg — has prompted the Commission to act.

“I’m tempted to quote Bob Dylan,” said Moscovici. “The times they are a-changing. What we’re doing is part of a trend internationally.”

The European Parliament, meanwhile, continues to conduct its own inquiries into special tax deals of the kind revealed by Luxleaks. The Commission’s competition department is also investigating special national tax arrangements.

Another proposal in the Commission action plan will require companies who benefit from the EU’s single market to pay “a fair share” of taxes to the country where they make their profits.

The Commission also announced it will launch a public consultation that will run from June 17 to Sept. 19, seeking feedback on a proposal to require companies to disclose their profits in annual reports on a country-by-country basis.

Tamira Gunzburg, Brussels director of the anti-poverty group ONE, welcomed the public consultation but said it “should not slow down the momentum for financial transparency. Given that measures already exist for certain sectors, we expect the Commission to charge ahead with legislation for public country-by-country reporting well before the end of the year.”