At a conference organised by the EU Tax Observatory on Tuesday 30 May, European experts discussed the future of corporate taxation. They all highlighted the complexity of the system, before going on to discuss the measures they felt were most relevant.
According to Mona Barake, a researcher at the Observatory, the current complexity of the tax system is mainly due to digitisation. Giorgia Maffini, director of tax policy at auditing firm PwC, deplored this complexity, which makes tracking difficult. “How far can we go until the system becomes dysfunctional?”, she asked.
For Chiara Putaturo, European tax policy adviser for Oxfam, fairness and equality in the tax system depend on three factors: - equal opportunities for small and medium-sized enterprises (SMEs) compared to large companies; - windfall profits, which lead to a concentration of wealth; - inequality between low- and high-income countries.
In response to the first point, Benjamin Angel, director of direct taxation, tax coordination, economic analysis and evaluation at the European Commission’s DG TAXUD, explained that the BEFIT initiative would be “a simplification shock for SMEs”. “They are often forgotten by tax policies”, he acknowledged.
The BEFIT initiative (see EUROPE 13107/21), expected in September, aims to introduce a common set of rules allowing EU companies to calculate their tax base using a formula, while ensuring a more efficient distribution of profits between Member States. It will also aim to reduce compliance costs. “This is an initiative that the European Parliament has asked for for a long time”, said MEP Markus Ferber (EPP, German).
Ms Barake explained that BEFIT is based on the same idea as Pillar I of the OECD agreement, but uses a different formula. “The idea is to create a consolidated profit, not only on sales, but also where assets and employees are, which might create additional revenue”, she explained.
Pillar I (see EUROPE 13107/25), which includes a new system for allocating the taxing rights of the largest multinationals to the jurisdictions where the profits are made, does not meet with unanimous approval. Ms Putaturo regretted that the ambition of Pillar I had been reduced and “will therefore only allow a small reallocation of the percentage of profitability”. Mr Ferber shared her concerns about the finalisation of this agreement, which will be achieved through a multilateral convention.
“It is true that Pillar I only covers a limited number of countries and companies, but it is a major breakthrough”, defended Mr Angel. In his view, it addresses the shortcomings of taxes on digital services, which carry the risk of double or triple taxation. (Original version in French by Anne Damiani)