EU Expects Tax Avoidance Fight to Reaffirm Continent's Relevance

Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.

By Jan Stojaspal

Sept. 12 — The European Union's fight against corporate tax avoidance has stopped being just a fiscal matter and is now a way for the union to reassure citizens of its continued relevance in the face of Brexit and rising populism across the continent.

“I see that populists are all over Europe, in your country, in my country,” European Tax Commissioner Pierre Moscovici said at a news briefing Sept. 10 at the end of a two-day Economic and Financial Affairs Council (ECOFIN) meeting in Bratislava, Slovakia.

And the populists say that “we must recover national sovereignty and what's the use with Europe,” Moscovici added.

“Here we have the proof of the importance and the effectiveness of Europe,” he said. “Why? Because there is a field where it's undoubtful that without Europe nobody can act. Nobody can fight tax evasion, tax avoidance at the national level. The playing field is at least continental, if not global.”

The Bratislava meeting brought together European Union finance ministers, as well as central bankers and representatives of the OECD and the International Monetary Fund.

More Cross-Border Effort Needed

According to Peter Kazimir, Slovakia's minister for finance, improving tax certainty was a major topic at the meeting, and the general agreement was that more needed to be done, including in areas of cross-border harmonization of tax rules and cross-border dispute resolution.

The effort to fight terrorism financing and money laundering also would require improvements to interagency cooperation, improvements to international exchange of information, and mandatory disclosure rules on intermediaries, such as advisers, banks and others who “seek to profit from the promotion, design or implementation of tax evasion and aggressive tax schemes,” Kazimir said at a press conference on Sept. 12.

According to Moscovici, the fight against corporate tax avoidance is now at the top of EU agenda, which is a stark difference compared with when he was appointed commissioner in September 2014.

“When I became Commissioner for taxation, frankly speaking, I was not very optimistic about the portfolio,” he said. “I was told that we are blocked by unanimity everywhere, it takes a lot of time to have any kind of directive.”

But the mood has changed “because the world is changing,” Moscovici said. “Now it takes five months, seven months, one month, to have a directive on very ambitious matters. Why? Because everybody is conscious that we are living in a world where opacity is no more possible and where transparency must be the road.”

Decisions of the Past

However, European Union finance ministers were all too keenly aware of how tax decisions of the past continued to dog their own current affairs.

In addition to Ireland, which the European Commission last week ordered to recover up to 13 billion euros ($14.5 billion) from Apple in undue tax benefits, Luxembourg and the Netherlands are also caught up in tax disputes.

In October 2015, the commission decided that both countries violated EU state aid rules after it concluded that they granted selective tax advantages to Fiat Chrysler Automobiles NV, in the case of Luxembourg, and Starbucks Corp., in the case of the Netherlands.

All three countries are appealing to the European Court of Justice.

Speaking to reporters outside the Reduta conference hall, where the ECOFIN meetings took place, Pierre Gramegna, Luxembourg's minister of finance, said that there is no question about the future direction of the EU in fighting international tax avoidance.

“For the future, we all know that we are going to have new rules which the EU is going to implement even before others; we are pioneers,” he said. “We have adopted a package of anti-tax avoidance measures in the directive last June, and, as Luxembourg, we fully support that.”

However, he said that when it comes to Apple and other cases that the commission is looking at, the courts will have to decide.

“In the case of Apple and a few other cases that the commission is looking at, it's about an interpretation of rules in the past,” he said.

“The commission has brought up a new interpretation of the rules and looks back on how this will impact. So, obviously, here we have to wait what the European Court of Justice is going to say. Ireland has done an appeal in the Apple case, Luxembourg has done an appeal in the Fiat case.”

Jeroen Dijsselbloem, Eurogroup president and Dutch finance minister, who also briefly spoke to reporters on arrival for day two of the ECOFIN meetings, said: “International companies have an obligation to pay taxes in a fair way, and I think all of us need to work together to make sure they do.

“My message to those companies is: You are fighting the wrong battle, you have to move on, times are changing, you need to pay your taxes in a fair way, a part of the will be in the U.S. and a part of that will be in Europe, so get ready to do that.”

‘Tremendous Progress.'

Moscovici said that “tremendous progress” had been achieved by the commission in the past couple of years, including:

  •  Agreement on the anti-tax avoidance directive,
  •  Agreement on the automatic exchange of information related to tax rulings and country-by-country reporting of multinational companies,
  •  New legislative proposal by the commission in April for public country-by-country reporting,
  •  Requirement that EU member countries create central registries of beneficial ownership of companies, and
  •  Starting a process that is expected to lead to the establishment of an official black list of uncooperative tax havens.

He also said that the black list will be drawn up by the end of 2017.

CCCTB, VAT and Mandatory Disclosure

Going forward, the commission will be putting forward by late October or early November a new proposal on the Common Consolidated Corporate Tax Base, which will serve the dual purpose of fighting tax avoidance and boosting employment and economic growth, Moscovici said.

“It will be, I believe, the best instrument for fighting aggressive tax planning and cross-border tax abuse,” he said. “It will eliminate the loopholes and mismatches between national systems, which companies can currently exploit.”

But it will also make business easier, he added, by easing the administrative burden and cost of companies operating in the EU by offering “a single set of rules that cross-border companies can use to calculate their taxable profits in the EU.”

“Thus it will provide more tax certainty for businesses and our member states alike.”

Moscovici envisions a two-step approach for the launch of a CCCTB, first introducing a common tax base “so that there are no loopholes, so that there is clarity and reduction of administrative burden for business,” which would be followed by consolidation, after we prove that it works.”

“With CCCTB, we'll see what the reactions are,” he said. “I would say I felt quite positive tone on that with some nuances.”

He said that the commission was not working on minimal corporate tax rates. “We want effective taxation,” he said. “That means that we don't want companies not to pay taxes or to pay too little taxes. Member states are then free to determine what rates they choose.”

He also hopes the commission will be able to make “decisive” progress on a financial transactions tax by the end of 2016, and he reiterated the commitment to “move towards a definitive VAT regime,” citing a recent but unspecified document that put the EU losses on VAT at 160 billion euros ($180 billion).

Looking further ahead, Moscovici confirmed that the commission planned to propose in 2017 mandatory disclosure rules for tax advisers, banks and other intermediaries who detect schemes designed to circumvent newly adopted measures against tax avoidance and bank reporting requirements, which is consistent with the framework set out in the OECD's anti-tax base erosion Action 12 recommendations on mandatory disclosure.

To contact the reporter on this story: Jan Stojaspal in Bratislava at

To contact the editor responsible for this story: Penny Sukhraj at

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

Request International Tax