Under the Luxembourg Presidency of the Council of the European Union, the Chamber of Deputies held an Interparliamentary Conference on Stability, Economic Coordination and Governance in the European Union on 9 and 10 November 2015 in Luxembourg. The third round table was devoted to fair tax competition within the European Union (UE), one year after the revelations of the LuxLeaks affair and as ministers agreed on the automatic exchange of tax rulings during the ECOFIN Council of 6 October 2015. According to Alain Lamassoure, Chairman of European Parliament's Special Committee on Tax Rulings and a participant in the conference, the golden rule is to tax profits where the activity is carried out.
The Chairman of the Committee on Finance and Budget of the Chamber of Deputies, Eugène Berger, underlined by way of introduction, the need to strengthen the fiscal coordination of Member States and to define actions at a high level of governance, in order to prevent the use and development of offsets between tax systems and to allow a fairer tax competition. He cited the "innovative initiatives" taken in recent years by the EU and the international institutions in this context: the amendments to the Parent-Subsidiary Directive in order to fight against abuse and double non-taxation, the agreement on the automatic exchange of information on cross-border tax rulings in October 2015, the establishment of the European Parliament's Special Committee on Tax Rulings (TAXE Committee) in February 2015, the EU's action plan on corporate taxation published in June 2015 by the European Commission or even the BEPS (Base Erosion and Profit Shifting) action plan of the OECD, adopted by the G20 finance ministers in Lima (Peru) on 9 October 2015.
The European Commission's action plan on corporate taxation
Bernardus Zuijdendorp, head of the "Company Taxation Initiatives" unit of the European Commission's DG for Taxation and Customs Union then detailed the objectives of the new action plan on corporate taxation, presented by the European Commission in June 2015.
He recalled that tax avoidance is a problem for the internal market, calling for a more coherent and competitive approach to corporate taxation. He also emphasised the need to restore the link between the taxation and the place where the activity takes place, one of the most important aspects of the Commission's action plan.
The revival of the Common Consolidated Corporate Tax Base (CCCTB) is also one of the central points of the Commission's action plan, he said, announcing that it had launched a public consultation on the revival of the CCCTB.
Bernardus Zuijdendorp also emphasised the need to implement actions at European level to coordinate the approach of Member States toward the BEPS, announcing that the Commission was preparing further action in this area for 2016.
"The EU already has very substantial weapons to fight against aggressive tax strategy"
Alain Steichen, Associate Professor of international taxation and corporate taxation at the University of Luxembourg, then spoke about issues of tax competition. He explained that the focus of the EU had changed: whereas in the past it was more concerned with the taxation of Member States, nowadays companies are its main concern.
In this context, the professor recalled the two strategies of multinationals with regard to taxation. The first, the aggressive strategy, involves keeping the activity in one country and transferring the profits to another country (relocation of profit). The second involves relocating the activity to another country, and therefore the tax base.
Given the principle of subsidiarity and the rule of unanimity for decisions on tax matters, we must find an economic and philosophical basis sufficient to justify Community action, he said, recalling that the EU already had "very substantial weapons to fight against aggressive tax strategy".
The golden rule is to tax the profits where the activity is carried out
Alain Lamassoure, President of the TAXE Special Committee of the European Parliament, then presented the work of his committee. Even if the European Parliament has "almost no legal competence" on the subject of taxation of corporate profits, it has a political responsibility, he insisted. He pointed out that this is to ensure that the principle of loyalty between Member States, as enshrined in the treaties, is guaranteed. "There will be a before and after LuxLeaks, just like in the realm of banking there was a before and after Lehman Brothers", he assured.
Alain Lamassoure indicated that the TAXE Special Committee had sent delegations to half a dozen Member States, visited Switzerland and the United States, and had heard out 15 of the largest multinationals that benefited from the tax optimisation system. Four conclusions could be drawn from this work.
The first is that in the EU, "tax war behaviour" is still used "to attract the seats of multinationals". "Each country is a tax haven for someone else", he said, adding that the multiplicity of tax laws in the 28 Member States "leads to a shocking result".
The second conclusion calls for changes both at EU level and internationally. Tax competition as such is not harmful, it is even healthy, according to Alain Lamassoure, but what is not normal, is that the country does not apply the rules of transparency, loyalty and fairness in tax matters, although they are applied in all other areas. "The golden rule" is to tax profits where the activity is carried out, he said, calling to implement the CCCTB as quickly as possible within the EU.
At global level, according to the TAXE Committee, we must reach equal conditions of competition, the most important points being the tax domiciliation rules, the evaluation methods of transfer policies, in particular the valuation of the commercial property of patents and of innovation, and the obligation for each company to report on its activities, its workforce, its turnover, its profits and the tax paid.
Finally, the TAXE Committee has questioned the real added value of the digital economy. What is the added value of a platform like Facebook other than providing our personal data voluntarily and free of charge, asked Alain Lamassoure. The web is a terrific new space for freedom but freedom requires legal and tax rules, concluded the MEP.