Corporate taxation system has reached its limits, say ministers and MEPs

Tax competition as such cannot be avoided, but today’s system has reached its limits and led to unwanted side effects. Small firms should not have to bear the tax burden of multinationals that pay very little. Action is needed to harmonise corporate tax practices across Europe, so as to make tax competition clearer and fairer. This was the key sentiment voiced at Tuesday’s meeting of the Special Committee on Tax Rulings with finance ministers from Luxembourg, Italy, France, Spain and Germany.

Luxembourg finance minister and ECOFIN chair Pierre Gramegna underlined that fighting fraud and tax evasion is the Presidency’s top priority. “Finance ministers agree that they cannot do without corporate tax revenues and multinational companies should pay a fair share”, he said. Luxembourg is committed to delivering an agreement among EU countries on the directive on automatic exchange of tax rulings, introducing a common corporate tax base, completing work on an agreement on the “interest and royalties directive” by the end of this month and working towards an EU-wide minimum effective corporate taxation, he added.

MEPs expressed concerns about the unanimity rule in the Council on tax issues and doubts as to whether all 28 member states are really willing to progress in the fight against “aggressive” tax planning practices. They also called upon the Council to address the Parliament’s wish for country-by-country reporting of corporate profits and taxes in countries where business is done, as stated in Parliament’s position for negotiations on the Shareholder rights directive.

Finally, MEPs also expressed dismay at the Council’s lack of openness about tax discussions in its Code of Conduct Working Group and pressed it to come up with a common definition of “aggressive” tax planning.

Here you will find a summary of the live tweets of the debate with the finance ministers of Italy (Pier Carlo Padoan), France (Michel Sapin), Spain (Luis De Guindos) and Germany (Wolfgang Schäuble). You can also watch the video recording of the debate (soon available).