The European Parliament’s Subcommittee on Tax Matters (FISC) is continuing its reflection on how to better combat harmful tax practices in the EU. On Wednesday 16 June, MEPs reviewed the 224 amendments tabled to the draft own-initiative report (see EUROPE 12711/6) prepared by Aurore Lalucq (S&D, France). Interviewed by EUROPE after the meeting, the MEP outlined her ambitions for the upcoming negotiations.
“For my Group and myself, it is important that Parliament is also a force of proposal in tax matters, especially at a historic moment like this, with the G7 agreement on international tax reform (see EUROPE 12740/12), the work at the OECD, the European Commission being rather constructive, involvement of the Member States, etc. Parliament must have its place, as the representative of Europeans; it is important from a democratic point of view”, she said.
At the meeting, the French MEP said it was her proposal to completely rewrite the Code of Conduct on business taxation - the EU’s main tool for tackling harmful tax practices - which will be “the most difficult point to discuss”.
The Code of Conduct has its limits and its benefits, she explained. Ms Lalucq readily acknowledges that the Code has helped to undo a number of aggressive tax practices related to preferential regimes. “Except that today, we are in an aggressive and unfair tax competition, which is no longer based only on preferential criteria, but is more global than that and, therefore, the Code of Conduct has reached its limits”, she said.
In her initial draft report, Ms Lalucq already called for an urgent review of the criteria, governance and scope of the Code of Conduct. In an amendment (n°210), she goes into more detail and asks for the introduction of a new FATAL code (Framework on Aggressive Tax Arrangements and Low-rates), with the idea that it would be “fatal” to harmful tax practices.
In particular, the new Code should ensure that countries with a zero corporate tax rate are automatically included in the EU’s ‘black list’ of tax havens. It should also introduce a definition of “minimum level of economic substance” to assess whether a tax regime is potentially harmful. The work of the Code of Conduct Group should also be more transparent and Parliament should have a say.
According to her proposal, Member States would be allowed to implement countermeasures that would reduce tax avoidance incentives, should a Member State refrain to roll back a regime that had been assessed as harmful in the context of this framework within two years, and in particular regarding: - non-deductibility of costs; - withholding tax measures; - limitation of the participation exemption; - special documentation requirements, especially regarding transfer pricing.
According to her, the amendments tabled by the political groups were rather “constructive”, in particular by the Renew Europe, Greens/EFA and The Left Groups, but also, in part, by the EPP Group, which, even though it takes a different position from that of the S&D, still starts from the observation that unfair tax policies are not normal or tolerable, she noted.
At the meeting, the political groups considered that the MEP’s draft report was balanced and provided a good working basis. However, it is still too early to prejudge the outcome of the negotiations, as the first working meeting of the shadow rapporteurs on the text took place on Wednesday afternoon.
The final vote on the report is currently scheduled for 13 July in parliamentary committee and September in plenary. See the amendments: https://bit.ly/2U9mYKW (Original version in French by Marion Fontana)