Communication on an external strategy for effective taxation

The EU has embarked on an ambitious reform agenda to ensure fair and effective corporate taxation in the Single Market. As part of this agenda, Member States have called for an EU approach to address external challenges to their tax bases, given the global nature of harmful tax competition and aggressive tax planning. The European Parliament has also demanded a unified EU position on international tax arrangements and a stronger stance against tax havens, through its work against corporate tax avoidance.

Currently, effective taxation in relation to third countries is mainly tackled through national anti-avoidance measures, which tend to vary considerably. Among the different national approaches are white, grey or black lists, specific provisions for low/no tax jurisdictions or case-by-case provisions against abuse. The basis for deciding which jurisdictions should be subject to these measures, and when, also differs from one Member State to the next.

However, as Member States work to coordinate their corporate tax policies within the Single Market, in order to counter-act abusive tax practices and ensure effective taxation, they also need to address their divergent approaches to tackling external base erosion threats. Certain companies exploit loopholes and mismatches between Member States' defensive measures to shift profits out of the Single Market, untaxed. In addition, businesses face legal uncertainty and unnecessary administrative burdens, due to 28 different national policies for assessing and addressing third countries' tax systems.

The diversity in Member States' approaches sends mixed messages to international partners about the EU's tax good governance expectations and creates doubts about when defensive mechanisms will be triggered. A coordinated EU external strategy on tax good governance is therefore essential to boost Member States' collective success in tackling tax avoidance, ensure effective taxation and create a clear and stable environment for businesses in the Single Market.

ESO: Background information: Fair Taxation: Commission presents new measures against corporate tax avoidance http://www.europeansources.info/record/press-release-fair-taxation-commission-presents-new-measures-against-corporate-tax-avoidance/

ESO: Background information: Taxation: Council agrees criteria for the screening of third country jurisdictions http://www.europeansources.info/record/taxation-council-agrees-criteria-for-the-screening-of-third-country-jurisdictions/

---