Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Tough Measures Needed to Reform Tax on Corporate Profits

Tough Measures Needed to Reform Tax on Corporate Profits ec Editorial TAX REVIEW 2016­1 Pierre Moscovici* Corporate tax avoidance may be technically legal, but it is fundamentally unfair. Every cent lost from legitimate tax revenues limits the capacity of EU countries to implement their economic and social policies, to foster innovation and to support growth-friendly policies. Europeans deserve the support of the European Commission in reclaiming vast sums of money from corporations that engage in aggressive tax planning. Similarly, small and domestic companies should be shielded from the uneven market conditions generated by unfair tax competition and large-scale tax avoidance by some of their multinational competitors. There needs to be a fundamental reform of corporate taxation in the EU, to tackle tax avoidance, secure sustainable revenues and strengthen the Single Market. This is what the Commission is intent on delivering and we're doing so quickly. Just four months into our term in office, this Commission had already presented a proposal on the automatic exchange of information on cross-border tax rulings. Within seven months, this major initiative was unanimously agreed by Member States ­ record time for an EU tax proposal. As a result, from this year, Member States will systematically share pre-defined information with each other on all of their cross-border tax rulings, including any rulings issued in the previous five years. There are no escape clauses that will allow Member States to refuse information and the Commission will receive the data it needs to check that the rules are properly applied. These new transparency requirements for tax rulings herald a new era of openness and cooperation between EU tax authorities in corporate taxation. They also allow the EU, once again, to be the flag bearer of tax transparency globally and to push our international partners to follow suit. The Commission's next step in reforming company taxation was a comprehensive Action Plan in June 2015. This sets out a range of soft and hard law measures for the short-, medium- and long-term that can fundamentally overhaul the corporate tax environment in the EU. The Action Plan is all-encompassing, covering Commissioner for Economic and Financial Affairs, Taxation and Customs. transfer pricing, patent boxes, country-by-country reporting, Code of Conduct reform, dispute resolution, joint audits, and more. The centrepiece of the Action Plan is the plan to relaunch the Common Consolidated Corporate Tax Base (CCCTB) ­ our silver bullet when it comes to corporate tax reform. The CCCTB aims to significantly improve the business environment in the Single Market, while also closing off many opportunities for corporate tax avoidance. It is exactly what we need in the EU to address the corporate tax challenges that we face today ­ Member States, MEPs and businesses all agree on this. However, the CCCTB needs a push to move forward. Taking on board the feedback from Member States' discussions on the original 2011 proposal, the Commission has started working on a new proposal to introduce a mandatory CCCTB through a step-by-step approach. The common base would be pinned down first, before moving to consolidation, and the new CCCTB would be mandatory for certain companies, to strengthen its potential in preventing tax avoidance. The new C(C)CTB proposal will be one of the Commission's key initiatives in 2016, and the preparatory work is already well underway. Another critical issue raised in the Action Plan is the question of effective taxation. While awaiting the CCCTB, how do we ensure that profits made in the EU are taxed in the EU, where the activity takes place? There are a number of ways to achieve this, including closing legislative loopholes, improving the transfer pricing system and implementing the `modified nexus approach' for IP regimes. Member States are already working on many of these ideas from our Action Plan. For example, Finance Ministers are discussing a new anti-abuse clause for the Interest and Royalties Directive, to prevent companies from playing with this legislation to enjoy double non-taxation. Once agreed, similar provisions could be considered for other corporate tax legislation. Given the global nature of corporate tax avoidance, we also recognize the need to look beyond the borders of the Single Market for measures to combat it. The G20 agreement on the final OECD Base Erosion and Profit EC TAX REVIEW 2016/1 ©2016 Kluwer Law International BV,The Netherlands TOUGH MEASURES NEEDED TO REFORM TAX ON CORPORATE PROFITS Shifting project late last year was a truly welcome development in this respect. The Commission and Member States actively supported the development of the global BEPS measures, which should ensure fairer and more effective corporate taxation worldwide. Now that BEPS is finalized, our focus must shift to promoting their proper implementation ­ in Europe and worldwide. In the EU, we have already taken important first steps in this direction. The smooth and consistent implementation of OECD BEPS measures within the Single Market underlies many of our reforms. For example, the new transparency legislation for tax rulings is a first concrete deliverable on BEPS ­ going even further than the international requirements. Member States have also committed to respecting the modified nexus approach in their IP tax regimes. In 2016, our work will continue to be keenly focussed on finding coordinated, effective and EU-compatible solutions for implementing BEPS. Once again, the Commission will act fast to present solutions which will protect Member States' tax bases and ensure fair competition for all businesses, while also preserving the integrity and competitiveness of our Single Market. The EU's commitment to corporate tax reform and the new BEPS measures must be echoed by our international partners, however, to ensure a level playing field and prevent negative spillovers. We will support the OECD in monitoring the implementation of BEPS, while also strengthening the EU's own mechanisms against external base erosion threats. This will include the development of a common EU system for screening, assessing and, when necessary, listing third countries that fail to deliver on their tax good governance obligations. We will also continue our support to developing countries that struggle to implement the necessary reforms, and we will work with our international partners - particularly the OECD, UN, IMF and World Bank ­ in ensuring that these countries are integrated in the global good governance framework. It is a little more than a year since I took up the role of European Commissioner and assumed responsibility for EU taxation policy. In that short time, we have truly shaken things up in the area of corporate taxation and planted the roots for deep and very necessary reforms in the EU. In the year ahead, our work will continue with the same pace and ambition, always focussed on the end-goal of fairer, more efficient and more growthfriendly corporate taxation for EU citizens and businesses. EC TAX REVIEW 2016/1 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png EC Tax Review Kluwer Law International

Tough Measures Needed to Reform Tax on Corporate Profits

EC Tax Review , Volume 25 (1) – Feb 1, 2016

Loading next page...
 
/lp/kluwer-law-international/tough-measures-needed-to-reform-tax-on-corporate-profits-Lo4LKrYlOl
Publisher
Kluwer Law International
Copyright
Copyright © Kluwer Law International
ISSN
0928-2750
Publisher site
See Article on Publisher Site

Abstract

ec Editorial TAX REVIEW 2016­1 Pierre Moscovici* Corporate tax avoidance may be technically legal, but it is fundamentally unfair. Every cent lost from legitimate tax revenues limits the capacity of EU countries to implement their economic and social policies, to foster innovation and to support growth-friendly policies. Europeans deserve the support of the European Commission in reclaiming vast sums of money from corporations that engage in aggressive tax planning. Similarly, small and domestic companies should be shielded from the uneven market conditions generated by unfair tax competition and large-scale tax avoidance by some of their multinational competitors. There needs to be a fundamental reform of corporate taxation in the EU, to tackle tax avoidance, secure sustainable revenues and strengthen the Single Market. This is what the Commission is intent on delivering and we're doing so quickly. Just four months into our term in office, this Commission had already presented a proposal on the automatic exchange of information on cross-border tax rulings. Within seven months, this major initiative was unanimously agreed by Member States ­ record time for an EU tax proposal. As a result, from this year, Member States will systematically share pre-defined information with each other on all of their cross-border tax rulings, including any rulings issued in the previous five years. There are no escape clauses that will allow Member States to refuse information and the Commission will receive the data it needs to check that the rules are properly applied. These new transparency requirements for tax rulings herald a new era of openness and cooperation between EU tax authorities in corporate taxation. They also allow the EU, once again, to be the flag bearer of tax transparency globally and to push our international partners to follow suit. The Commission's next step in reforming company taxation was a comprehensive Action Plan in June 2015. This sets out a range of soft and hard law measures for the short-, medium- and long-term that can fundamentally overhaul the corporate tax environment in the EU. The Action Plan is all-encompassing, covering Commissioner for Economic and Financial Affairs, Taxation and Customs. transfer pricing, patent boxes, country-by-country reporting, Code of Conduct reform, dispute resolution, joint audits, and more. The centrepiece of the Action Plan is the plan to relaunch the Common Consolidated Corporate Tax Base (CCCTB) ­ our silver bullet when it comes to corporate tax reform. The CCCTB aims to significantly improve the business environment in the Single Market, while also closing off many opportunities for corporate tax avoidance. It is exactly what we need in the EU to address the corporate tax challenges that we face today ­ Member States, MEPs and businesses all agree on this. However, the CCCTB needs a push to move forward. Taking on board the feedback from Member States' discussions on the original 2011 proposal, the Commission has started working on a new proposal to introduce a mandatory CCCTB through a step-by-step approach. The common base would be pinned down first, before moving to consolidation, and the new CCCTB would be mandatory for certain companies, to strengthen its potential in preventing tax avoidance. The new C(C)CTB proposal will be one of the Commission's key initiatives in 2016, and the preparatory work is already well underway. Another critical issue raised in the Action Plan is the question of effective taxation. While awaiting the CCCTB, how do we ensure that profits made in the EU are taxed in the EU, where the activity takes place? There are a number of ways to achieve this, including closing legislative loopholes, improving the transfer pricing system and implementing the `modified nexus approach' for IP regimes. Member States are already working on many of these ideas from our Action Plan. For example, Finance Ministers are discussing a new anti-abuse clause for the Interest and Royalties Directive, to prevent companies from playing with this legislation to enjoy double non-taxation. Once agreed, similar provisions could be considered for other corporate tax legislation. Given the global nature of corporate tax avoidance, we also recognize the need to look beyond the borders of the Single Market for measures to combat it. The G20 agreement on the final OECD Base Erosion and Profit EC TAX REVIEW 2016/1 ©2016 Kluwer Law International BV,The Netherlands TOUGH MEASURES NEEDED TO REFORM TAX ON CORPORATE PROFITS Shifting project late last year was a truly welcome development in this respect. The Commission and Member States actively supported the development of the global BEPS measures, which should ensure fairer and more effective corporate taxation worldwide. Now that BEPS is finalized, our focus must shift to promoting their proper implementation ­ in Europe and worldwide. In the EU, we have already taken important first steps in this direction. The smooth and consistent implementation of OECD BEPS measures within the Single Market underlies many of our reforms. For example, the new transparency legislation for tax rulings is a first concrete deliverable on BEPS ­ going even further than the international requirements. Member States have also committed to respecting the modified nexus approach in their IP tax regimes. In 2016, our work will continue to be keenly focussed on finding coordinated, effective and EU-compatible solutions for implementing BEPS. Once again, the Commission will act fast to present solutions which will protect Member States' tax bases and ensure fair competition for all businesses, while also preserving the integrity and competitiveness of our Single Market. The EU's commitment to corporate tax reform and the new BEPS measures must be echoed by our international partners, however, to ensure a level playing field and prevent negative spillovers. We will support the OECD in monitoring the implementation of BEPS, while also strengthening the EU's own mechanisms against external base erosion threats. This will include the development of a common EU system for screening, assessing and, when necessary, listing third countries that fail to deliver on their tax good governance obligations. We will also continue our support to developing countries that struggle to implement the necessary reforms, and we will work with our international partners - particularly the OECD, UN, IMF and World Bank ­ in ensuring that these countries are integrated in the global good governance framework. It is a little more than a year since I took up the role of European Commissioner and assumed responsibility for EU taxation policy. In that short time, we have truly shaken things up in the area of corporate taxation and planted the roots for deep and very necessary reforms in the EU. In the year ahead, our work will continue with the same pace and ambition, always focussed on the end-goal of fairer, more efficient and more growthfriendly corporate taxation for EU citizens and businesses. EC TAX REVIEW 2016/1

Journal

EC Tax ReviewKluwer Law International

Published: Feb 1, 2016

There are no references for this article.