The European Parliament’s Committee on Economic and Monetary Affairs (ECON) adopted on Tuesday 13 July, by 44 votes to 6 with 8 abstentions, the draft report by Aurore Lalucq (S&D, France), which makes a series of recommendations on how to better combat harmful tax practices in the EU (see EUROPE 12711/6).
The key provision of the adopted text: Ms Lalucq’s proposal to completely rewrite the Code of Conduct for business taxation - the EU’s main tool for combating harmful tax practices - and replace it with a new Code called FATAL (‘Framework on Aggressive Tax Arrangements and Low-rates’).
Interviewed by EUROPE after the vote, the MEP said she was “pleasantly surprised to see this compromise voted, even though in all the negotiation meetings we felt a real willingness from the political groups to put forward proposals for reform of the Code and to ensure that Parliament has an ambitious and strong voice”.
“The cooperation with the different political groups was excellent. Everyone was very constructive, involved and available on this dossier, especially the EPP. We had a last-minute twist: the vote in favour of rewriting the Code of Conduct, which we did not expect, even though we had sensed interest from the Renew Europe, Greens/EFA and The Left Groups”, she explained.
The compromise amendment on this point was adopted by 27 votes to 23 with 7 abstentions and is broadly in line with Ms Lalucq’s original proposal (see EUROPE 12742/9). The Groups involved have only made “marginal changes”, she said.
“The same main themes remain: including the income of individuals and not just companies, a minimum tax rate below which tax practices would be considered harmful, an economic substance criterion, which is essential to verify the economic reality behind the fact that a company declares its income in this or that country”, she explained.
With this proposed rewrite, Parliament also seeks to simplify the criteria for determining whether a tax practice is harmful. “The original Code of Conduct is one page long, so we wanted to do the same: very simple, one page, but adapted to the times”, said Aurore Lalucq.
The review should also involve a group of experts from civil society, the Commission and Parliament and provide for greater involvement of Parliament in the process of devising and adopting new criteria to combat harmful tax practices, the text says.
Another requirement is that the new Code should take the form of a binding instrument. “The idea is to say that Parliament wants it to be binding this time. It is up to the European Commission to seize this opportunity and make a legislative proposal in this sense”, explained the French MEP.
The text also suggests that the EU Council’s Code of Conduct Group on Business Taxation invite MEPs as observers to its discussions and encourages it to publicly broadcast certain meetings when they do not require confidential deliberations.
MEPs make further recommendations to the European Commission, including the adoption of a definition of a “minimum level of economic substance” and the development of guidelines on how to design “fair and transparent tax incentives” that are less likely to distort the single market and ensure fair competition.
The plenary vote on the report is scheduled for September. (Original version in French by Marion Fontana)