Fair corporate tax crucial to Covid recovery

Commenting on the European Commission’s communication on corporate taxation, European Trade Union Confederation Confederal Secretary Liina Carr said:



“The EU is losing between 35-70 billion Euro each year as a result of corporate tax avoidance, resulting in fewer well-paid jobs, lower social protection and run-down public services.



“At a time when Europe is pulling together to tackle the economic and social consequences of the Covid crisis, continuing a race to the bottom in tax rates between member states which feeds tax avoidance is completely self-defeating.



“Common rules for corporate tax across Europe, including those to neutralise the misuse of shell companies for tax purposes, will be crucial in paying fairly for the public investment needed for a real and fair recovery from the Covid crisis. Trade unions therefore welcome the fact the Commission have put progress on corporate tax back on track with these proposals, although we appreciate concrete legislation will depend on the outcome of the negotiations taking place at the OECD and G20.



“Europe should be taking a leading role in global efforts to create a level playing field on corporate tax. In case an agreement at a global level cannot be reached, the EU must take the responsibility to introduce a minimum corporate tax rate of 25% on its own and to continue its efforts for a fair allocation of taxing rights without delay.”



Notes



The Commission’s proposal, “Business in Europe: Framework for Income Taxation” or BEFIT, is expected to be based on a set of corporate tax rules for the whole of the EU which would allow taxing the same things across the bloc, and an allocation of profits’ formula between Member States which still need to be determined.

 

As rightly emphasised in the Commission’s communication, the use of a formula to allocate profits will remove the need for the application of complex transfer pricing rules, which are difficult to apply and enforce in a modern economy relying on intangible and non-marketed assets, and allow taxation where profits are generated.



ETUC resolution on EU taxation: https://www.etuc.org/en/document/etuc-resolution-eu-taxation-and-own-resources



Photo: Creative Commons/Ken Teegardin