Saturday 22 October 2016

MEPs make renewed push for common European tax regime

Sarah Collins in Brussels

Published 07/07/2016 | 02:30

Pierre Moscovici, European Union Economic Commissioner
Pierre Moscovici, European Union Economic Commissioner

EU parliamentarians have made a new push for cross-border tax harmonisation despite Irish opposition and regardless of Britain's move this week to cushion its exit from the Union by lowering taxes for large companies.

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In a report adopted by a large majority yesterday, MEPs called for EU-wide rules on how to calculate corporate taxes to be introduced before the end of the year.

They also pushed for a common withholding tax on profits and curbs on the use of patent boxes - something Ireland only recently introduced to encourage investment.

The report comes less than two weeks after the UK voted to exit the bloc, and the same week as British chancellor George Osborne promised to slash corporation tax to 15pc to cushion the economy from the effects of the vote.

"There is a risk, yes, that we see a race to the bottom on tax rates and corporate taxation," said Danish socialist MEP Jeppe Kofod, one of the authors of Parliament's report.

"We need to work closely with the UK on tax."

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Fine Gael's four MEPs voted against the report, which is not binding, but does shore up the European Commission's campaign to tackle tax avoidance by multinationals.

Fine Gael MEP Brian Hayes said the report was like "harmonising tax rates through the back door".

"At a time when the UK government is planning to reduce their corporate tax, it is not in Ireland's interest that the European Parliament reheats once again their ambition for corporate tax harmonisation," Mr Hayes said. "We in Ireland need to stay competitive, create new business opportunities and make it clear that our future remains in the EU and in the Eurozone."

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The European Commission has confirmed its intention to revive a controversial law on how corporate taxes are calculated, known as the common consolidated corporate tax base (CCCTB).

The draft, first published in 2011, languished in the EU legislative ether, but this week Commission tax chief Pierre Moscovici said he would relaunch it in the autumn.

The Commission says work is "well advanced" on the new proposal, which would concentrate on the practice of "transfer pricing", where companies shift profits around their subsidiaries to take advantage of tax loopholes in different countries.

Brussels has already ruled against unfair transfer pricing in several high-profile competition cases, fining Luxembourg and the Netherlands tens of millions of euro each for what it said were tax advantages given to Fiat and Starbucks, respectively.

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