Brussels Moves to Crack Down on Corporate Tax Evasion
BRUSSELS (Financial Times) - The European Commission has moved to step up its crackdown on corporate tax evasion by unveiling a plan to force all 28 EU countries to share details of tax rulings they grant to multinationals, a requirement Brussels believes will curtail efforts by some governments to lure companies by offering cut-rate tax bills.
Under the proposal, national tax authorities would be required to file quarterly reports detailing all tax rulings they have issued to large cross-border companies and which countries could be effected by the decision. Rival tax authorities would then be able to demand a fuller explanation of any ruling they find suspicious.
Brussels said it would also explore whether to force companies to disclose more information on their tax treatment amid mounting criticism in both Europe and the US that several EU tax jurisdictions are used by some of the world’s best-known companies to shift profits away from their home bases to avoid being taxed where profits are made.
"We have to rebuild the link between where companies really make their profits and where they are taxed,” Pierre Moscovici, the commission’s economic chief, said in a statement. "To do this, member states need to open up and work together.”
The proposal comes after a series of scandals that have threatened to undermine the European Commission itself after the revelation that Luxembourg offered rulings that allowed hundreds of multinationals to avoid big tax bills while Jean-Claude Juncker, the new commission president, was prime minister there.
Mr Juncker has denied knowledge of the rulings, insisting they were issued by independent tax authorities. But the revelations have prompted an investigation by the European Parliament and an acknowledgment by Mr Juncker that he should have been more aggressive in policing Luxembourg’s tax system. In November, Mr Juncker survived a no-confidence vote in the parliament that would have forced him to resign over the issue.
Under the proposal, national tax authorities would be required to file quarterly reports detailing all tax rulings they have issued to large cross-border companies and which countries could be effected by the decision. Rival tax authorities would then be able to demand a fuller explanation of any ruling they find suspicious.
Brussels said it would also explore whether to force companies to disclose more information on their tax treatment amid mounting criticism in both Europe and the US that several EU tax jurisdictions are used by some of the world’s best-known companies to shift profits away from their home bases to avoid being taxed where profits are made.
"We have to rebuild the link between where companies really make their profits and where they are taxed,” Pierre Moscovici, the commission’s economic chief, said in a statement. "To do this, member states need to open up and work together.”
The proposal comes after a series of scandals that have threatened to undermine the European Commission itself after the revelation that Luxembourg offered rulings that allowed hundreds of multinationals to avoid big tax bills while Jean-Claude Juncker, the new commission president, was prime minister there.
Mr Juncker has denied knowledge of the rulings, insisting they were issued by independent tax authorities. But the revelations have prompted an investigation by the European Parliament and an acknowledgment by Mr Juncker that he should have been more aggressive in policing Luxembourg’s tax system. In November, Mr Juncker survived a no-confidence vote in the parliament that would have forced him to resign over the issue.