Newsletter | Volume 1

The fight for fair taxation in the EU is high on Parliament's agenda following the revelations of LuxLeaks and the Panama papers. At a time when EU countries are struggling to recover from the crisis, the still parliament focuses on greater transparency and to end the current unfair tax practices.

Parliament has set up two ad hoc committees to look into tax rulings and is in the process of launching a board of inquiry to investigate the many consequences of the Panama Papers.

Tax decisions or rulings are written statements issued by a tax authority, setting out in advance how a corporation's tax will be calculated and which tax provisions will be used. Tax rulings are often criticised when multinational companies are found to pay less in taxes than ordinary taxpayers.

Overview of Parliament initiatives
The first select committee on tax rulings published its final report last year. It set out ideas for fair and transparent taxation across the EU. This report is now continued by the second tax rulings committee to collaborate on a report, outlining the necessary steps to fight the alleged corporate tax avoidance.

Following the revelations in the Panama papers, Parliament decided to set up another inquiry committee. Its mandate will be confirmed during May's plenary session in Strasbourg.

The past work
Recommendations to fight aggressive corporate planning report spells out the legal steps that the EU and the member states should take was based on the work of the first tax rulings committee. The parliament also called the European Commission to produce a legislative proposal with a country-by-country report on companies' profits, tax, and subsidies.

These efforts are also combined with the adoption of tougher rules on money laundering. The anti-money laundering directive will oblige member states to keep central registers of information on who owns companies and other legal entities.EU countries have until 26 June 2017 to implement the new legislation. The Panama papers underlined the importance of these new rules.

Missed opportunity
Another proposal is for the exchange of information on tax rulings between EU countries. The current adoption applies to cross-border judgments but leaves out tax deals within member states, giving the stakeholders rather limited access to the complete information on tax.

Parliament is being consulted on corporate anti-tax avoidance measures. This legislation is the EU's response to the OECD's action plan to tackle base erosion and profit shifting. This refers to tax planning strategies that exploit loopholes in the international tax system to artificially shift profits to places where there is little or no economic activity or taxation, resulting in little or no overall corporate tax being paid.

The future discussions must focus on public transparency rules for multinational companies to avoid this continued discussion and claims.

How to prevent profits being shifted to a country with lower or no taxes.
Disclosures and tax information on how multinationals with global revenues of more than €750 million deal with tax issues in the countries they operate in
These multinationals must file an open and transparent country-by-country tax report in the member state where the parent company is legally based.

EU must soon focus on a sustainable EU legislation on a common corporate tax base after determining the involvement of the non-cooperative tax jurisdictions called tax havens.

Perhaps an EU-wide definition of a tax haven should be the first step to proceed in a structured, sustainable and straightforward manner to achieve the desired long-term results.