The European Union executive on Tuesday passed a plan for a more uniform corporate tax system for the bloc as a whole, whose 27 national systems are struggling in a world where cross-border business, often over the internet, is commonplace.
This proposal would require certain large companies operating in the EU to publish their effective tax rates for greater transparency and introduce new anti-tax avoidance measures to tackle abuse of letterbox companies.
“It is time to rethink taxation in Europe,” said Paolo Gentiloni, EU Commissioner for Economic Affairs, in a statement.
“As our economies transition to a new growth model, so too must our tax systems adapt to the priorities of the 21st century.”
Governments around the world are desperately seeking additional revenue to rebuild their pandemic-ravaged economies, and corporate taxation has become an obvious target after decades of decline.
The Organization for Economic Cooperation and Development (OECD) is to agree on global rules in June on where and with what effective minimum rate large multinational corporations such as Google, Amazon or Facebook are taxed.
The OECD seeks to prevent governments from lowering competitive tax rates to attract investment and create a way to tax profits in countries where customers are located, rather than where a company sets up its offices for tax purposes.
The European Commission plans to use the OECD deal as a springboard for more uniform rules for corporate taxation across the EU.
The plan would also address debt debt under current corporate taxation and encourage companies to use equity rather than debt to fund their activities.
EuroCommerce, which represents the European retail and wholesale sector, welcomed the plan, saying that different tax systems are a major cost barrier across the EU’s internal market.
“The digital transformation of our ecosystem and the economy as a whole needs a suitable tax system,” said a statement.
The European Commission’s latest plan is now being submitted to member states and EU legislators for approval. Their plans for EU corporate tax rules have already failed, as setting tax rates is a jealously guarded prerogative of national parliaments.
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