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European parliament calls for action on corporate tax evasion and a minimum tax rate

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Commission president Jean Claude Juncker told MEPs last week at a joint meeting of the committees for tax rulings and for economic and monetary affairs that the current system of corporate tax rules is ‘unfit for purpose and unjust. Some companies are losing out, whereas others win by hiding behind a variety of national rules. We need a better insight into how multinational companies behave and how they make use of the differences between countries.’

Mr Juncker said that fighting fraud and tax avoidance and evasion are among his commission's top ten priorities. ‘We need to move towards tax harmonization. The internal market is incomplete in the area of corporate taxation’, he told MEPs in his opening remarks. He also pointed to the difficulties of aligning all EU member states, with their power to veto on tax issues, but pointed to the example of the harmonized systems used to collect VAT and excise duties to show that a common approach is not impossible.

Mr Juncker suggested that the council should establish a committee on taxation, like that on financial and economic issues to build on the work of the current code of conduct group in the council and report to ministers. However, this idea did not gain much support in a special Parliament hearing on Tuesday night. ‘I’m very pro-European, but I think there are other steps we have to take in the short term,’ said Luis de Guindos, the Spanish finance minister, who pushed the view that member states in the eurozone should simply cooperate better. The consensus was that action is needed to harmonise corporate tax practices across Europe, so as to make tax competition clearer and fairer.

Finance ministers from the eurozone’s biggest economies voiced support for a minimum tax rate across the bloc. Speaking in front of a Parliament committee on corporate tax evasion, formed in response to the so-called Luxleaks revelations, finance ministers from Germany, France, Italy and Spain said better cooperation between national tax authorities along with a minimum tax rate, would help combat aggressive tax planning by multinational corporations. ‘There have to be certain minimum rates of taxation,’ German finance minister Wolfgang Schäuble told the committee.

Luxembourg finance minister and ECOFIN chair Pierre Gramegna said that Luxembourg is committed to delivering an agreement among EU countries, and underlined his support of a directive on automatic exchange of tax rulings, introducing a common corporate tax base, and completing work on an agreement on the ‘interest and royalties directive’ by the end of this month and working towards an EU-wide minimum effective corporate taxation. See www.bit.ly/1Fp10Wf.

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