Handelsblatt Exclusive

EU: Shut Tax Havens With Minimum Rate

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Let the battle commence. Germany and France are demanding an end to corporate tax havens set up by Ireland and Belgium, among others. The European Union is stuck in the middle.
  • Why it matters

    Why it matters

    A minimum tax threshold would mark the first-ever step to harmonize tax policy in the 28-nation European Union. Germany and France have long felt disadvantaged by smaller E.U. partners that have lured companies with ultra-low corporate rates.

  • Facts

    Facts

    • Berlin and Paris have led calls for a minimum corporate tax rate across the European Union, while nations like Ireland and Luxembourg are opposed to the idea.
    • Last year’s “Luxleaks” scandal, in which Luxembourg lured multinational companies with secret ultra-low tax deals, has prompted the European Union to rethink the issue.
    • The European Commission and a special committee of the European Parliament are conducting investigations into corporate tax havens within the European Union.
  • Audio

    Audio

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The European Union is considering introducing a minimum corporate tax rate across the continent, Handelsblatt has learned.

It is a controversial move that pits smaller and larger E.U. countries against each other and would mark the first concrete step toward harmonizing tax policy across the 28-nation economic bloc.

Corporate tax rates vary widely in the European Union, with France at the high end at 34.4 percent and Ireland at the low end at 12.5 percent. Aside from the official rates, some smaller countries also offered multinational companies tax rebates of up to 90 percent to attract their business.

The plan, the first elements of which could be unveiled as early as next month, would answer the demands of Germany and France for Brussels to finally crack down on controversial corporate tax havens set up by smaller E.U. countries like Luxembourg and Ireland.

Germany and France are not stopping at tax policy. The E.U.’s two largest economies have also launched a broader push for deeper integration of the 18-nation euro currency bloc that forms the core of the European Union, according to France’s Le Monde newspaper.

Their ambitions directly contradict efforts led by Britain’s Prime Minister David Cameron, whose country does not use the euro, to loosen the E.U.’s ties and hand more sovereignty back to the member states.

Harmonizing taxes has long been rejected by E.U. countries as an infringement of their cherished fiscal authority. A rethink apparently began after revelations last year that Luxembourg had been quietly luring multinational companies for years by offering them ultra-low tax deals. Other countries including Belgium and the Netherlands have since admitted they brokered similar deals.

The new plans stemming from Brussels could provoke a major battle between the European Union’s smaller countries, which have long relied on such tax havens to lure foreign businesses to their shores, and the E.U.’s larger members that are now calling for the tax system to become more harmonized.

“Germany and France are demanding a minimum threshold value: We are reacting to that,” said one source close to the Commission.

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