Multinationals are taking advantage of tax fragmentation at European and international level, said the Commissioner for Taxation, Pierre Moscovici, on Tuesday 27 March, defending the actions of the European Commission to tax the digital sector.
If Europe prizes its sovereignty, including fiscal sovereignty, it must exercise it collectively, Moscovici told the special TAXE 3 committee and the committee on economic and monetary affairs of the European Parliament. If it does not, there is a risk of a race to the bottom in which citizens and national budgets will lose out and the only winners will be multinationals, which will happily continue to pay less tax.
On the taxation of the digital sector, following the debate of the European Council, Moscovici said that he was reasonably optimistic as to the possibility of reaching a unanimous agreement of the Council on the proposal to tax the gross income of certain activities of the digital sector giants, including the GAFA, at a level of 3% (see EUROPE 11988).
The support base is wide, he said. To convince the more reluctant countries, such as Ireland and Luxembourg, which are calling for a primarily international solution, he stressed that the tax, designed to bring in €5 billion initially (covering 180 companies, half of them American), will affect consumers and not specific member states that are victims of delocalisation.
When asked by Brian Hayes (EPP, Ireland) about the possibility of first reaching an agreement at international level on the issue, Moscovici noted that the OECD report on the taxation of the digital sector, to which the USA contributed, revealed the existence of both insufficient taxation of digital companies (9.5% on average, according to the Commission) and a lack of agreement on how to proceed.
As this tax on the digital sector is only a short-term measure, he urged the member states to agree unanimously by the end of 2018 on harmonising the common consolidated corporate tax base (CCCTB), “the mother of all reforms”, to bring the tax regimes into line with the digital age.
Alain Lamassoure asked how progress could be made in parallel in the short-term work on taxing the digital sector and the long-term work on the CCCTB, with discussions of the working group on the CCCTB making no progress. Pirkko Ruohonen-Lerner (ECR, Finland) said that Finnish companies opposed any reform that would harm their interests.
The Parliament has recently reached its position on the CCCTB, adopting the Lamassoure and Tang reports (see EUROPE 11982).
On the work on the fight against tax fraud and tax evasion, Moscovici said that there were no tax havens by international standards in the EU. However, it is “absurd” to deny that there are aggressive taxation practices, he added.
For this reason, the Commission is in touch with the member states (Belgium, Cyprus, Luxembourg, Malta, Ireland, the Netherlands and Hungary) whose practices came under fire in the European Semester budgetary process. According to the Commissioner, some countries admit that they need to change their tax systems and others do not. However, he was unable to tell Jeppe Kofod (S&D, Denmark) and Sven Giegold (Greens/EFA, Germany) whether the Commission would officially recommend changing these practices in May.
VAT. Finally, Moscovici said that the Commission would present new proposals in May to move towards a definitive value-added tax (VAT) regime. (Original version in French by Mathieu Bion)