EU relaunches ambitious corporate tax reform

This file photo taken on Feb 5, 2016 shows EU Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici giving a press conference to present the European Commission's adopted Opinion on Portugal's 2016 Draft Budgetary Pla
This file photo taken on Feb 5, 2016 shows EU Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici giving a press conference to present the European Commission's adopted Opinion on Portugal's 2016 Draft Budgetary Plan at EU Headquarters in Brussels.PHOTO: AFP

BRUSSELS (AFP) - The European Commission on Tuesday (Oct 25) relaunched an ambitious corporate tax reform package it says will boost the economy and reduce abuses after a series of high-profile tax cheating scandals sparked public uproar.

The Commission, the executive arm of the European Union, said that after failing in 2011 to win support, it had listened to member states and had now produced a more business-friendly version.

"We are proposing a system which can simultaneously support business, attract investors, promote growth and stop large-scale tax avoidance," EU Economic and Financial Affairs Commissioner Pierre Moscovici said in a statement.

"My message to our member states today is this - Let's seize this opportunity, and quickly, to deliver the fairer, more competitive, more growth-friendly corporate tax system that the EU needs," Moscovici said.

The original proposal ran into strong opposition from some member states, especially Britain, who objected to Brussels having a say in tax matters which are meant to be decided only by national governments.

Member states currently set their own tax rates which vary quite widely across the 28-nation bloc.

The proposal also fanned suspicion that the European Union wanted to standardise the tax base as a prelude to winning the right to levy its own taxes to fund its activities, a step seen by some as a step too far toward a federal Europe.

EU Vice-President Valdis Dombrovskis said "tax policy should support the EU's goals of economic growth and social justice."

"Today's proposals aim to boost growth and investment, support enterprise and ensure fairness," he said in the statement with Moscovici.

In a first step, the Commission proposes setting up a Common Consolidated Corporate Tax Base (CCCTB), meaning that "companies will for the first time have a single rulebook for calculating their taxable profits throughout the EU."

This CCCTB system will be "mandatory for large multinational groups which have the greatest capacity for aggressive tax planning, making certain that companies with global revenues exceeding 750 million euros (S$1,135 million) a year will be taxed where they really make their profits."

It will also encourage companies to raise funding by issuing shares rather than via bank borrowing, an important change to European business culture.

The statement noted that tax rates are not mentioned in the CCCTB as "these remain an area of national sovereignty."

"However, the CCCTB will create a more transparent, efficient and fair system for calculating the tax base of cross-border companies, which will substantially reform corporate taxation throughout the EU," it said.

The Commission, which under former Luxembourg Premier Jean-Claude Juncker prides itself on taking political initiatives, said companies would now be able to file just one tax return for all their EU activities, saving time and money.

Juncker has made cracking down on tax cheats a high-profile priority of his Commission but he himself has also been snagged by several cases involving sweetheart tax deals with major multinationals arranged during his time as Luxembourg premier.

The Commission first raised the issue in 2001 and has worked over the years to try and convince member states.

Moscovici said "a lot has changed" since 2011, arguing that the CCCTB plan was "more relevant today than ever." The latest CCCTB proposals will now be submitted to the European Parliament for discussion.