EU to discuss corporate tax evasion

Ireland’s corporate tax regime is to come under the spotlight at a meeting of EU finance ministers today in Luxembourg with ministers due to discuss the issue of minimum effective taxation.

Luxembourg, which holds the rotating presidency of the Council of the European Union, has put taxation on the agenda of the two-day meeting of finance ministers , amid pressure from countries such as Germany and France to deal with the issue of aggressive tax planning. The European Commission is also driving the clampdown on corporate tax evasion.

EU commissioner Pierre Moscovici, who assumed responsibility for taxation when he succeeded Olli Rehn as economics commissioner last November, has vowed to prioritise taxation during his five-year term.

Today’s discussion is likely to focus on the interests and royalties directive, an EU law that deals with cross-border taxation for companies with subsidiaries across the EU, and the parent-subsidiary directive. But the Olli Rehn.

Harmonised tax base

The commission in June announced plans to relaunch the proposal for a harmonised corporate tax base next year, as part of a clampdown on aggressive tax planning. The aim of the CCCTB is to require all member states to apply the same rules for calculating the taxable profits of cross-border companies, to eliminate tax loopholes between countries.

Ireland, along with Britain, the Netherlands, Luxembourg and Sweden is expected to argue that tax remains a member-state competence and is an important economic tool.

Speaking ahead of the meeting, Minister of State Simon Harris said Ireland was opposed to any move towards tax harmonisation. "Our position is crystal-clear. Ireland has a fully transparent tax system and is committed to the OECD process, in particular the ongoing work on base erosion profit shifting [BEPS]. Any challenges that arise in terms of tax planning should be dealt with at a global level."

Last year’s Luxembourg leaks scandal, which revealed how thousands of companies slashed their tax bill through the use of tax rulings, has increased pressure on the EU to tackle multinational tax avoidance, following significant public outrage at the revelations.

While the proposal to revive the stalled CCCTB legislation formed the cornerstone of the commission’s action plan on tax unveiled in June, the EU’s executive arm is turning its intention to the concept of minimum effective taxation in a bid to ensure that double non-taxation is averted.

Competitive disadvantage

While in most cases taxation remains a member state competency, the commission is casting the debate about minimum effective taxation in the context of the single market. However, a number of member states, including Ireland, argue any move to standardise tax systems or bases within the EU could leave the EU at a competitive disadvantage to regions such as the US and Asia.