Issue link: https://maltatoday.uberflip.com/i/608340
maltatoday, SUNDAY, 29 NOVEMBER 2015 16 MEPs this week approved a series of recommendations from the European Parliament's special tax committee (TAXE) aimed at tackling corporate tax avoidance. The committee was set up in February in response to the 'LuxLeaks' scandal that revealed Luxembourg authorities had permitted corporate tax structures that significantly re- duced multinationals' tax bills. Companies implicated in the scandal include JP Morgan, Pepsi, Ikea and Heinz. The amount of money lost to EU member states through corporate tax avoidance each year is estimated at €1.1 tril- lion. Although tax avoidance is legal, companies which use complex structures to reduce their tax bills are coming un- der increasing scrutiny from the public and from legislators internationally, who have promised to crack down on the practices. Following the LuxLeaks disclosures, the EU introduced regulations which obliged member states to share informa- tion about new cross-border tax rulings and existing deals within three months. Two years ago, a Swiss court sentenced a German-born man to three years in jail for selling client data from Swiss bank Julius Baer to the German tax authorities. The EU Commission President Jean-Claude Juncker has identified tackling corporate tax avoidance as one of the Commission's top 10 priorities. In this week's vote, the European Parliament has unequivo- cally backed the fight against aggressive tax avoidance. How- ever, the contents of the TAXE committee's report have di- vided opinion, with some MEPs concerned about the impact on national sovereignty. Commenting on the report, S&D group spokesperson for the special TAXE committee, Peter Simon, noted the impor- tance of EU-wide action, saying; "We are not dealing with isolated incidents here, but rather with systematic tax dump- ing that is organised by, or at least tolerated by, the state." He continued; "The negative effects of tax avoidance by multinational companies have to be borne by all other tax- payers, including small and medium enterprises." Simon concluded by saying he believes the work of the TAXE committee will, "make clear what we expect from member states and the European Commission," and that; "It must be our goal to make companies pay taxes in those coun- tries where profits are generated." His S&D group colleague, Elisa Ferreira, co-author of the TAXE committee report, offered a similar opinion. She de- scribed tax avoidance as having created a "politically unbear- able" situation. Commenting on the report she said: "Today, Parliament has given the EU governments and the European Commis- sion a clear roadmap to fight aggressive tax planning by mul- tinationals and to change this unacceptable situation." However, she emphasised that, "the work is not over. We could not access some information. By setting up a new committee, we hope to complete our work and keep up the pressure so that these recommendations are translated into concrete actions." MEPs from the Parliament's right wing ECR grouping re- jected the report, arguing that while they believe multina- tional corporations should pay more tax, it should be up to member states to decide. Specifically, they criticised the reports' suggestion of intro- ducing a compulsory common consolidated tax base and the definition of a minimum taxation rate. Inside the EP 16 Inside the EP Malta is a staunch opponent of the common corporate tax base, but MEPs and supporters like France could be gaining the upper hand Maltese MEPs stand united against common tax scheme Averting 'Taxodus' ALL six Maltese MEPs voted against the 'Report on tax rulings and other measures similar in nature or effect' pre- sented to the European Parliament. The report received 508 votes in favour, 108 against and 85 abstentions. Parliament agreed to introduce man- datory country-by-country reporting by multinational companies of financial data, including profits made, taxes paid and subsidies received. The resolution also advocates introducing clear defini- tions of "economic substance" and other determining factors of corporate tax bills. In order to maintain a competitive edge, wealthy individuals and corpora- tions are offered advantageous tax rates, using tax breaks to attract investment or hot money. This has earned Malta a reputation as an offshore haven for all the hot money within the eurozone. Since joining the single currency in 2008, successive governments have championed an investor-friendly econ- omy, to the degree that other EU coun- tries, including Germany, France, the UK and Italy, view Malta as a tax haven, similar to Luxembourg. MEP and former Prime Minister Alfred Sant said tax competition should remain part of the limited array of decision tools available to national economies. He said the report was proposing measures that implicitly or explicitly promoted moves that would introduce tax convergence and harmonisation on an EU-wide ba- sis. "This goes against the interests of smaller economies of the Union, that lack the endowments of the larger econ- omies," Sant said. He said the flexibility of the smaller EU economies in policy making was already constrained by the convergence in VAT rates, state aid rules, the single currency, the six pack/two pack rules applied to their budgets. Sant added that this has led to greater structural divergences between parts of the Union. "Reducing the tax flexibility of such economies would further increase these disparities, which is unfair, dysfunction- al and unacceptable," he said. While rallying behind measures uniquely designed to promote full trans- parency in national tax treatments, Sant said "the report fails to provide a tight definition of fair tax competition, main- ly because it is slanted towards a situa- tion in which tax should be harmonised across the EU." The three Nationalist Party MEPs within the European Popular Party also voted en bloc against the report with David Casa, Roberta Metsola, and Therese Comodini Cachia expressing their strong reservations while stressing their firm belief in tax transparency and the fight against tax fraud. "But in our view that does not mean the mandatory introduction of a Com- mon Consolidated Corporate Tax Base (CCCTB). "The EU is not a homogeneous area and not all regions in the EU face the same economic realities, be it for their domestic market size, geographical real- ities or resources," the three MEPs said in a statement issued Wednes- day afternoon. They added that while the re- port did contain useful points on transparency, which they supported, "we are of the view that questions of tax of the nature of CCCTB must remain an issue of national competence since they reflect the different econo- mies of Member States." "We are con- vinced that a one-size-fits all approach is not the right way forward for Europe as inevi- tably it would be the EU's smaller econo- mies, such as Malta, that would bear the d i s p r o p o r t i o n a t e brunt of such poli- cies." Part 2 of our series on the European Parliament Labour MEP and head of delegation Alfred Sant