The European Commission in Brussels is sticking to a plan to force the European Union’s 28 members to introduce a minimum tax on businesses operating within their borders, Handelsblatt has learned.
The plans by the E.U.’s executive arm, while still vague, have been moved forward this week despite widespread opposition from a number of smaller E.U. countries that have long relied on tax deals with multinational companies to attract them to their shores. Handelsblatt first reported the plans on Tuesday.
The Commission’s goal is that effective taxes paid by a company should not fall below a certain level in the future, a senior European Union official told Handelsblatt, noting that this is why a minimum threshold value needs to be defined.
“The whole thing is too complex. After all, there are legitimate reasons for variances between the effective and nominal tax rate.”
While the Commission has not yet developed a concrete method of computing this lower limit yet, some of the ideas floating around have emerged this week.
For instance, officials said they were examining whether the threshold value could amount to 50 percent of the national nominal corporate income tax rate in a given country. If a company were taxed at less than this lower limit, the tax authorities in another country would have the right to tax the company a second time.
The European Commission hopes to present this model and other concepts to the finance ministries of member states, which would have to sign off on any Commission proposal along with the European Parliament.
Some experts have their doubts, however.
“I’m skeptical that this is even feasible,” said Gottfried Breuninger of law firm Allen & Overy, where he heads the tax law team. “The whole thing is too complex. After all, there are legitimate reasons for variances between the effective and nominal tax rate.”
The debate over the minimum taxation of companies was triggered by the “Lux Leaks” scandal last year, when it emerged that large multinational companies were paying little to no taxes in Luxembourg.
A number of other smaller countries in the European Union have since admitted offering similar deals to multinationals, including Belgium and the Netherlands.
A special committee in the European Parliament has been tasked with finding out exactly which tax benefits Luxembourg and other European Union countries have provided to corporations.
But the committee is running up against a wall of silence in its investigation: Not a single company has agreed to appear to answer questions in a hearing in the European Parliament scheduled for next Monday.
Sweden’s Ikea, Britain’s HSBC Bank, Italy’s Fiat, Silicon Valley giants Amazon and Google, and other prominent companies all declined to appear at the parliamentary hearing.
“This casts a shadow on efforts to clear up the issue,” European Parliament lawmaker Michael Theurer, a member of Germany’s pro-business Free Democratic Party, said. “To clear up the role of member states and their tax administrations, we need the parties involved to finally come clean,” he said.
Ruth Berschens is Handelsblatt’s bureau chief in Brussels. Christopher Cermak of the Handelsblatt Global Edition in Berlin contributed to this story. To contact the author: firstname.lastname@example.org