The European commission will launch a further crackdown on tax avoidance by reviving a long-stalled plan to overhaul how companies report their profits, according to Europe’s most senior tax policy official, The Guardian reports.
Under the plans, companies would have to calculate their profits under common European rules rather than national ones, closing down options for creative cross-border accountancy. The draft law, known as the common consolidated corporate tax base, will be published in late October or early November.
The idea has failed in the past, partly because of opposition from the UK and Ireland. But Pierre Moscovici, the European commissioner for economic and financial affairs, said that public outrage about companies paying very low rates of tax was helping the idea gain traction.
“We have a strong asset that was not present five years ago – it is the mood in the public and the scandals, which give us some strength. Clearly today the public cannot stand that multinationals do not pay their fair share of taxes, while ordinary citizens did in order to reduce deficits.”
The UK Treasury, under both Gordon Brown and George Osborne, opposed previous attempts to draw up common EU tax rules because it wanted to preserve national competence in this area. Moscovici, who met the chancellor, Philip Hammond, in Bratislava earlier this month, said he did not consider “the UK as an obstacle … when we speak on the fight against tax avoidance”, though he expects “very difficult debates” on the plans.
Speaking in a wide-ranging interview with the Guardian and other European newspapers including Le Figaro and Süddeutsche Zeiting, Moscovici also said the commission was not seeking to punish the UK over Brexit but would uphold the integrity of the single market.
“This commission is not organising a dirty fight, our goal is not to punish. But the principles are there,” he said. “The freedoms of the internal market cannot be seen one without the other.”
Moscovici, who also oversees the EU customs union, would not be drawn on whether he wanted the UK to remain in the free-trade area. Non-EU members such as Turkey have joined the EU customs union by agreeing to abide by EU trade agreements. The British government has not decided whether it wishes to remain in the customs union, but the international trade secretary, Liam Fox, is pressing for the UK to pull out.
Moscovici said the question “does not only depend on our own spirit, it also depends on the strategy of the British government. And for that we are still waiting patiently.”
Echoing other European leaders, he said the EU was prepared for Brexit divorce talks. “We are ready to negotiate tomorrow and that is not a joke,” he said. “We understand that this government needs time to prepare its negotiations, [but if it] waits for too long then it will seem that the democratic will is not respected.”
The former French finance minister said British politicians had not prepared the ground for the EU referendum following decades of badmouthing Brussels.
He said the remain campaign would have been on more solid foundations if successive British governments had sought to instil more pride in Europe. “That is the lesson that must be learnt in all European capitals,” he said. “I am not satisfied with politicians who make believe that by having less Europe or a weak Europe you can reconcile people to the European Union. My message is that if you want to fight anti-European positions you need to have a very pro-European stance.”
An ally of François Hollande, who is languishing in polls ahead of France’s 2017 elections, Moscovici said the EU executive was determined to push back “against populists’ destructive agenda, which can lead us to a dead end”. “This commission is an anti-populist commission. We believe that fighting anti-European populism is part of our mission.”
He also promised not to rest on efforts to construct Europe’s half-finished monetary union. Observers expect policies to develop monetary union will be in the deep freeze until new governments have been elected in France and Germany. Moscovici, a seasoned player in the Greek bailout saga, warned that no one could afford to kick the debate into the long grass.
Under his proposals, companies would face a single set of rules on how to calculate profits, but national governments would remain free to set the rate of corporation tax. Moscovici has promised the Irish finance minister, Michael Noonan, that he would not attempt to create a single EU rate of corporate tax. Ireland, which is fighting the commission’s ruling that it gave Apple a sweetheart tax deal, has always closely guarded its 12.5 per cent corporate tax rate, among the lowest in the EU.
Moscovici described he decision against Apple as “a watershed moment”, adding that it was not a decision against American companies or the Irish government. “We have sent out a signal that the era of large-scale tax avoidance by multinationals in Europe has ended.”
But the commission has not been immune to criticism on tax. The European commission president, Jean-Claude Juncker, was in the firing line when Luxembourg’s role in allowing massive corporate tax avoidance surfaced just weeks after he took office in 2014. Juncker ran the grand duchy for almost two decades when the tax schemes were hatched.
Asked last week about his role, Juncker said: “Very often, bank robbers and poachers are amongst the best police forces.”
