MEPs in the Subcommittee on tax matters (FISC) discussed the proposal “Business in Europe: Framework for Income Taxation” (BEFIT) with experts on Wednesday 25 January. These business representatives have expressed reservations about European tax harmonisation.
The European Commission had unveiled the outline of its forthcoming ‘BEFIT’ proposal, closely linked to the OECD negotiations, in May 2021 (see EUROPE 12721/3). This initiative aims to establish a common set of rules that allow EU companies to calculate their tax base on the basis of a formula, while ensuring a more efficient distribution of profits between Member States. It will also aim to reduce compliance costs and bring about a coherent approach to company taxation in the EU. As the public consultation closes on Thursday 26 January, BEFIT will be presented in autumn 2023.
“I understand everyone who argues that it is much more efficient to have a mandatory harmonised collection space for all companies in Europe”, said Gerhard Huemer, director of economic and fiscal policy at the United SME Research and Communication Unit.
“But if we look at this debate from the point of view, how likely to get the majority in the Council, and how, if you want to get the support of the National Assembly Associations, then it may be better to think about a sequencing of the development starting with optional possibilities”, he continued.
According to him, SMEs are used to a certain taxation model and are reluctant to change it because it comes with uncertainties and normal user costs.
Christian Kaeser, global head of taxation at Siemens and chairman of the tax committee of the Federation of German Industries, spoke in favour of optionality for SMEs up to a certain size.
Simon Loretz, senior economist at the Austrian Institute for Economic Research (WIFO), believes that any measure will create new market distortions. “The factor apportionment will define the tax burden and therefore there’s always a new incentive for multinationals to manipulate their allocation”, he explained.
“Basically, if you have a punitive formula, this will create winners and losers and redistribution between Member States”, he added. Moreover, harmonisation at European level will not solve the problem of interactions with non-European entities.
MEPs asked questions about the scope and allocation of taxable profits. They tried to assess how the initiative would affect the revenue generation of large and small Member States. (Original version in French by Anne Damiani)