Corporate taxation: MEPs call for tax haven black list, patent box rules, CCCTB and more

Corporate taxation

Recommendations to make corporate taxation fairer and clearer were voted by the Special Committee on Tax Rulings II on Tuesday evening. They call for an EU public register of beneficial owners of companies, a tax havens blacklist, sanctions against non-cooperative tax jurisdictions, action against abuse of “patent box” regimes, a code of conduct for banks and tax advisors, tax good governance rules in all EU trade agreements and a withholding tax on profits leaving the EU.

The report by co-rapporteurs Michael Theurer (ALDE, DE) and Jeppe Kofod (S&D, DK) was approved by 25 votes to 6, with 9 abstentions. It will be voted by Parliament as a whole during the July session in Strasbourg.

“Tax dumping is done at the expense of the general public and small- and medium sized companies, who are the backbone of our European economy. In a fair tax system, multinational companies also pay their share and they should do so where they add value and make their profits”, said Mr Theurer.

“With this report, Europe is stepping up to the plate on the fight against tax evasion and tax havens. We’re setting clear demands for increased accountability, effective deterrents in the form of markedly increased sanctions for tax havens, banks, tax advisors and companies, and we’re calling for increased European and international cooperation on this hugely problematic issue”, said Mr Kofod.

Tax haven black list

Committee members welcome EU Commission plans to draw up a common EU blacklist of non-cooperative jurisdictions. They call for a common definition of “uncooperative jurisdictions” and say that the blacklisting procedure should include an “escalation” provision to allow for dialogue with the jurisdiction in which shortcomings have been identified before deciding to blacklist it.

MEPs advocate sanctions against non-cooperative jurisdictions, including a possibility to review and even suspend free trade agreements and prohibiting access to EU funds. They add that sanctions should also be put in place for companies, banks, accountancy and law firms and tax advisors proven to be involved in illegal, harmful or wrongful activities with those jurisdictions.

They also call on EU member states to draw up sanctions against company managers involved in tax evasion and make it possible to revoke business licences in cases where professionals are involved in illegal tax planning and evasion schemes. The EU Commission should also explore the possibility of introducing financial liability for tax advisors engaged in unlawful tax practices, they add.

Misuse of “patent box” regimes

The report also criticises “patent box” tax regimes for intellectual property revenues. These “have not proven to be effective in fostering innovation. Regrettably, they are used by multinational companies for profit shifting through aggressive tax planning schemes (…) which leads to a race to the bottom. To prohibit misuse and to make sure they are linked to genuine economic activity, the Commission should propose binding union legislation.”

Plus…

MEPs also call for guidelines to better define what is allowed with regard to transfer pricing, better protection for whistle-blowers, an EU Commission proposal before the end of 2016 for a Common Consolidated Corporate Tax Base (CCCTB), an EU-wide withholding tax, to be collected by member states, to ensure that profits made in the EU are taxed at least once before leaving it, a code of conduct for banks, tax advisors, law- and accounting firms, a new EU Tax Policy Coherence and Coordination Centre to be created within the EU Commission and a global register of all assets held by individuals, companies and entities, such as trusts and foundations, to which tax authorities would have full access.

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