The European Parliament voted through a resolution calling for measures against tax evasion. The resolution was passed with an overwhelming 538 votes in favour, and only 73 against and 32 abstentions. The resolution of 19 April goes far in echoing Eurodad’s demand in calling for Automatic Information Exchange (AIE), Country-By-Country Reporting (CBCR), a mandatory Common Consolidated Corporate Tax Base (CCCBT) amongst other useful suggestions.
Switzerland has just signed a ‘Rubik’ deal with Austria which protects banks secrecy in return for an anonymous tax being returned to Austria. This is similar to the ruinous Rubik deals made with Britain and Germany. This deal, which must be ratified by both countries’ parliaments, makes public a covert Swiss-Austrian alliance to block EU cooperation against tax dodgers and prevent automatic exchange of tax information between European governments.
With the €1 Trillion the EU governments lose each year to tax dodging at stake. The prospect of a debt ridden jobless future has EU the asking questions. DG TAXUD the tax arm of the EU civil service will prepare a communication by December on the broad topic of tax havens and unfair tax competition.
EU Country-by-country reporting rules are now being discussed by member states and the European parliament. But one of the clearest flaws in the European Commission’s (EC) proposal to increase corporate and government accountability has been ignored. Namely, the EC has included an exemption meaning companies would not have to disclose payments in countries where criminal law prohibits such disclosure. Effectively this poses the question “Should the law apply in places where it is most needed, where governments are determined to pass laws to hide their own wrongdoing?”
January 3rds’ indictment of three Swiss bankers by a US court on tax evasion charges, shows that robust action against offshore centres can succeed. This underlines the terrible deal the populations of Germany, Britain and Greece will be getting if their governments conclude one sided tax deals, known as Rubik, with the Swiss Government.
Crucial practical recommendations of global trade unions include taxing profits where they are generated and ensuring corporate and financial transparency. Corporate tax minimization has been taken to such an extreme that many developed countries’ economic and political systems are in danger of collapse. Trade unions could play a key, constructive role in changing the harmful systems and mindsets behind this crisis, according to the Council of Global Unions and Education International’s (EI) new report Global Corporate Taxation and Resources for Quality Public Services.
The World Bank Group’s new policy on offshore financial centers will aim to improve the effectiveness of its private sector arm by helping countries tackle tax evasion but effective rules must be made for partner companies.
As part of the World Bank Group, The International Finance Corporation (IFC) has a mission to promote development. The IFC uses public aid money, to fund private companies’ operations in poor countries, which should generate growth and increased government revenues. But reports by IBIS and Eurodad found these companies using tax havens, taking revenue from those countries that they are meant to benefit.
EURODAD recently held a roundtable in the European Parliament on 21st November to launch its new report “Exposing the lost billions. How financial transparency by multinationals on a country-by-country basis can aid development.” This report explains why under current accounting regulations it is so easy for multinational companies to dodge taxes and proposes full country-by-country reporting as a key solution.
The European Commission released a proposal for country-by-country reporting on 25 October, this will help to address corruption surrounding extractive industries and logging. However this will not address the larger problem of tax dodging which is prevalent in these industries and widespread in all other sectors. European parliamentarians and member states could improve the proposal so that tax issues in all sectors are covered.
The EU could adopt a Common Consolidated Corporate Tax Base by early next year. Regrettably, participation will be optional for both member states and companies and no minimum tax rate will be applied, leaving the door open to increased tax competition.
The importance of tax for development is widely accepted. It is also increasingly being acknowledged that a company’s approach to taxation is an integral part of its Corporate Social Responsibility (CSR). Against this background Christian Aid has produced a briefing “Tax and Sustainability: A framework for businesses and socially responsible investors”. This framework can be used by ethical investors to asses whether a company’s tax policy is responsible in its design or implementation.
On the 22 September, the Committee for Economic and Monetary Affairs (ECON) in the European Parliament passed a report containing both concrete measures and broader statements against the race to the bottom in European corporate taxation, citing the financial strain this is placing on European countries and their citizens.
The EU is currently revising the parent-subsidiary directive, with the intention of preventing double or multiple taxation when the profits of a subsidiary are distributed to the parent company or companies. Too often such treaties effectively lead to double-non taxation. To address this the MEPs voted for an amendment to the proposal adding a tax, which must equal or exceed, 70% of the average official corporate tax rate of all EU member states, on capital inflows from dividend payments to parent companies. However the tax paid by the subsidiary in another member state can be deducted as long as it was taxed at or above this rate, currently 16%. This should reduce the harm done by treaty shopping within the EU, where companies locate their HQ wherever tax is most favourable.
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