14/12/2015 – Tax evasion costs the EU €1 trillion a year in lost tax revenue, according to the European Commission. The Lux leaks scandal showed that EU countries sometimes court multinationals with advantageous tax schemes. These practices were investigated by the Parliament’s special committee on tax rulings. MEPs adopted its report last month and on 15 December MEPs will debate another report, demanding that the Commission introduces legislation to restrain tax competition between EU countries.
The report by MEPs Anneliese Dodds, a UK member of the S&D group, and Luděk Niedermayer, a Czech member of the EPP group, calls on the Commission to propose legislation requiring EU countries to inform each other when taking measures that lower tax rates for corporations.
The two MEPs also call for corporations reporting how much tax they pay on a country-by-country basis as well as for protection of whistleblowers uncovering scandals such as Lux leaks.
If the report is approved, the Commission will have three months to respond to the recommendations, either with a legislative proposal or with an explanation for not doing so.
In order to balance their budgets, EU governments have cut spending while at the same time some countries have offered multinationals deals that significantly lower their tax burden, thereby preventing other countries from receiving this potential tax revenue.
In October the Commission ruled that tax arrangements offered by Luxembourg to Fiat and by the Netherlands to Starbucks constituted illegal state aid. Portuguese S&D member Elisa Ferreira who co-authored the tax rulings committee’s report welcomed the decision, but warned: “These two cases have proven that tax competition among states to attract companies and profits is the norm in the EU.”
MEPs adopted the special committee’s report in November, calling for mandatory country-by-country reporting of profits and taxes by multinationals. They have also set up another special committee that will continue working on the issue until at least June 2016.