EU: EU outlines plans to make multinationals pay their share of tax

The European Commission outlined plans on Wednesday to limit how much multinational companies can reduce taxes on their European earnings through the use of creative accounting.

The Commission, set to detail proposed tax measures on June 17, had already determined in March that European Union countries would have to share information on tax deals agreed with major corporations.

“We agreed on the need to combat tax avoidance by re-establishing the link between taxation and where the company actually does business,” Commission Vice President Valdis Dombrovskis told a news conference after a meeting of commissioners.

Dombrovskis said the Commission aimed to revive a 2011 proposal for a common consolidated corporate tax base (CCCTB), a single set of rules that companies operating in the European Union could use to calculate taxable profits.

Under that proposal, companies would have to comply with just one EU system for computing its tax liabilities, rather than different rules in each member state, and would only have to file a single tax return for the whole of their EU activity.

Dombrovskis acknowledged that consolidation of tax bases across borders would not be easy. Member states would need to agree on how to distribute tax revenues, something they have failed to do to date.

The commissioner said any CCCTB system would have to be compulsory, with those involved in aggressive tax planning unlikely to opt in, but recognised a consensus would have to be reached.

“It has to be an ambitious and also a realistic approach, realistic in the sense that it needs unanimous approval in the Council, so getting support of all EU states,” he said.

The European Conservatives and Reformists group in parliament, which includes Britain’s ruling Conservatives, said it opposed a common EU-wide corporate tax base, which it believed would act as a prelude to harmonised tax rates.

The Commission’s measures are designed to prevent aggressive tax planning by multinationals, such as artificially shifting profits to the country were the rates are lowest or securing beneficial tax rulings, such as those exposed in the “LuxLeaks” disclosures.