I want Europeans to wake up to a Europe where we have managed to agree on a strong pillar of social standards. Where companies’ profits will be taxed where they were made. President of the European Commission, Jean-Claude Juncker
WHY FAIR TAXATION COUNTS With its ambitious agenda to work towards growth, boosting investments and deepening the integration of economies, the European Commission aims at meeting demands for social justice and economic growth also through fair and effective tax coordination. Together with the European Union‘s Member States, the European Commission is working to make tax systems more transparent, more accountable and more effective across the board.
TAXATION IS A VITAL PART OF FAIR TAXATION IS THEREFORE
ANY FUNCTIONING SOCIETY. ESSENTIAL. It allows citizens to access quality For sustainable revenues, the European education, health care and public infra- social model, a competitive business structure. It helps provide a safety net environment and overall taxpayer morale. for the more vulnerable and a good tax mix can support social fairness.
FAIR TAXATION IS CENTRAL TO THE
EU‘S SOCIAL AND ECONOMIC MODEL. Taxation plays a crucial role in upholding a strong and sustainable economy, a thriving business environment and social justice.
TAX EVASION AND AVOIDANCE POSE TAX AVOIDANCE DISRUPTS
MAJOR RISKS TO EU MEMBER STATES FAIR COMPETITION economically, politically and socially. They between businesses in the Single Market. eat away at national revenues – reducing Many smaller or local companies suffer the funds available for public spending serious competitive distortions due to the and investment. aggressive tax practices of their larger rivals.
TAX ABUSE UNDERMINES THE
SOCIAL CONTRACT between citizens and their governments. Often governments compensate for the revenue losses by taxing citizens, workers and small businesses more. This under- mines the principle of fair burden sharing.
FAIR TAXATION IN THE EU Fair and effective taxation is a top political As a result, major strides have been made priority for the European Commission. It towards creating a fairer, more effective is linked to the EU‘s highest objectives, in- and more growth-friendly tax environment cluding a just society, a strong Single in the EU. Market, and a stable economy built on growth, jobs and investment.
EU citizens and businesses have grown
74 % SAY YES increasingly frustrated with the tax avoidance of certain companies and the tax evasion of certain individuals. They demanded change to the tax rules to prevent such activities. The Commission responded with an ambitious tax reform agenda, including tough new measures SHOULD THE EU DO MORE TO FIGHT AGAINST to fight tax evasion and avoidance. TAX FRAUD? Source: “2016 Eurobarometer“
THE EU AGENDA FOR FAIR TAXATION IS BASED ON THREE PILLARS:
TRANSPARENCY: “Tax transparency is absolutely indispensable to combat
opaque and abusive tax practices.” Commissioner Pierre Moscovici
EFFECTIVE TAXATION: “People have to trust that the tax rules apply equally to all. Companies must pay their fair share of taxes, where their real eco- nomic activity is taking place.” Vice - President Valdis Dombrovskis
GLOBAL GOOD GOVERNANCE: “A strong society depends on fair taxation.
It‘s an issue that belongs at the very top of our agenda, not just in Europe but throughout the world.” Commissioner Margrethe Vestager
TAX June 2013: March 2015: Information Exchange Transparency Requirements on Financial Accounts for Tax Rulings
TRANSPARENCY The Commission launched its fair taxation campaign with a Tax Transparency Package in 2015. Since then, major progress has been made in increasing openness and cooperation between Member States on tax issues. Member States have agreed to auto- matically exchange information on tax rulings and on multinationals‘ country-by- country reports. New EU rules will also ensure that tax authorities have access to anti- money laundering information. EU countries have started to share information on citizens‘ financial accounts abroad too, putting an end to bank secrecy in the EU. The Commission has also proposed public country-by-country reporting for multi- nationals and transparency requirements for intermediaries, to provide greater over- sight of companies‘ and advisors‘ activities.
December 2015: October 2015: May 2015:
EU signs Transparency EU signs Transparency EU signs Transparency Agreement with San Marino Agreement with Liechtenstein Agreement with Switzerland
January 2016: February 2016:
Country- by -Country EU signs Transparency Reporting on Multinationals Agreement with Andorra
April 2016: Public Country - by -Country Reporting on Multinationals
July 2016: July 2016: June 2017:
New Anti-Money EU signs Transparency Transparency Requirements Laundering Rules Agreement with Monaco for Intermediaries
EFFECTIVE TAXATION A goal in EU tax policy is to ensure that A review of preferential regimes (patent all companies pay tax where they make boxes) and transfer pricing rules was their profits. also launched, to prevent tax avoidance through these channels. To help achieve this, the Commission proposed the Anti-Tax Avoidance Directive In addition, a number of state aid cases (ATAD 1&2), which sets legally-binding have challenged unfair tax benefits anti-abuse measures for the entire EU. that some EU countries gave to multi- These new measures will enter into force national companies. from 2019, shutting down the main channels for tax avoidance that exist today.
WORKING FOR FAIR TAXATION IN EVERY EU COUNTRY
The economic crisis highlighted how in- In the European Semester, the Commission tertwined the economies of all EU coun- identifies economic and social priorities tries are. It showed that they need to work for the EU and each Member State for together if they want sustainable and the year ahead. Taxation and lately also inclusive growth in Europe. Therefore, EU aggressive tax planning feature highly countries agreed to coordinate their eco- in those publications, including recommen- nomic policies closely, through a process dations on how tax systems can be made known as the ‘European Semester’. fairer, where needed.
GLOBAL TAX GOOD GOVERNANCE Tax evasion and avoidance are global to monitor the situation and update the problems, which need to be tackled blacklist on a regular basis. globally. The EU has taken concrete action to implement international tax good governance standards. It expects its global partners to do the same, for a fair and level playing field worldwide.
In January 2016, the Commission pre-
sented a new External Strategy for Effective Taxation. This aims to strengthen coop- eration with the EU‘s global partners on fair tax matters. The Strategy also sets out how the EU should deal with countries that refuse to respect international good governance standards. The EU also gives high priority to support- ing developing countries in the interna- The EU listing process was designed to tional campaign for fair taxation. The EU‘s deal with non-cooperative tax jurisdictions. “Collect More, Spend Better” strategy The first EU blacklist was agreed by aims to boost EU support to low income Member States in December 2017. It was countries in tackling tax abuse and collect- published together with a “grey” list of ing sustainable revenues. countries that pledged to make improve- ments to their tax systems, in reaction to the listing process. The EU continues
Today‘s corporate tax rules are outdated, level. And the CCCTB offers tax incentives cumbersome and vulnerable to abuse. The to companies investing in growth-friendly EU needs a tax system that can stand-up activities, such as R&D. to the challenges of the modern economy and support the Union‘s wider policy goals. At the same time, the CCCTB will help cut Europe needs a new, modern, dynamic and out tax avoidance. The largest multina- fundamentally fair corporate tax system, tionals would all be covered by the CCCTB which will help the Single Market to thrive system, and the major channels of tax in the future. avoidance would be removed. The CCCTB‘s robust anti-abuse measures would also The Common Consolidated Corporate Tax help to stop companies from shifting profits Base (CCCTB) is the answer. The CCCTB out of the Single Market. was first proposed in 2011 and relaunched in an improved format in 2016. It is the The CCCTB is the fair, effective and com- model of a fair and growth-friendly corpo- petitive tax system that the EU needs rate tax system. for the future. It is now being negotiated by Member States, who must agree on On one hand, the CCCTB will make it much it unanimously. easier to do business in the EU. There would be just one rulebook for companies to calculate their taxable profits through- out the EU, and a one-stop-shop system to file tax returns. Companies could offset losses in one part of Europe against profits in another – just as they do at national Number of The CCCTB could corporate tax lift growth by up to rules in
+1.2 % the EU today:
28
Number of EU businesses could cut
1 corporate tax their compliance costs by rules with
DIGITAL TAXATION Globalisation and digitalisation bring In a digitalised world, it can be difficult to progress by creating jobs, advancing inno- work out where and how profits have been vative ideas and empowering individuals. made, and where they should be taxed. At the same time, they change the way we This means that some companies can make work, consume and produce. Digital com- vast profits in the EU, without paying any panies are growing faster than the economy taxes there. as a whole – and this is a trend that is only set to continue. Taxation must be adjusted to the digital revolution. That is why, in spring 2018, the In the EU, the Digital Single Market has Commission proposed EU solutions for been launched, to take full advantage of the fair and effective taxation of the digital the digital transformation that impacts economy. This included a fundamental our lives today. The EU‘s work for fair, reform of the way companies are taxed in effective and competitive taxation must the Single Market – to better reflect new be connected to these developments. forms of business. It also included a new Digital Services Tax. This will apply to The Digital Single Market can only deliver the hardest-to-capture digital activities, its full potential if it is based on a fair, while the comprehensive reform is stable and sustainable base. being put in place.
Today‘s corporate tax rules are ill-equipped
to cover the dynamic, intangible, user-dri- ven and mobile nature of digital companies.
that all companies active in the EU can compete fairly, irrespective of whether they are operating via the cloud or from brick and mortar premises. Commissioner Pierre Moscovici
EU CORPORATE TAX REFORM
CCCTB*
Country-by- Anti Tax Automatic Disclosure Automatic
Country Avoidance Exchange of Requirements Exhange of Reporting: Directives Information for Inter- Information Tax Authori- on Tax mediaries* on Financial ties Rulings Accounts
Public Tax Treaties More Scrutiny Greater Financial
Country- Recommen- on Trusts and Transparency Regulation: by-Country dation other Com- on Beneficial Good Gover- Reporting* panies (AML Ownershop mance in Rules) EU Funds
EU List of Reform of Improvements New Rules for Double Tax-
Non-Cooper- Code of to Transfer Patent Boxes ation Dispute ative Third Conduct for Pricing System Resolution Countries Business Mechanism Taxation
DIGITAL TAXATION* * = still to be adopted by Member States
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We are bringing about a paradigm shift in EU taxation – one that will make it more transparent, more efficient and more business friendly. We must continue to work together as a Union to achieve this. And we must continue to push our international partners do the same. Commissioner Pierre Moscovici
