Communication: Building a fair, competitive and stable corporate tax system for the EU

Taxation is central to the EU's work to build a stronger, more competitive and fairer economy, with a clear social dimension. Europe needs a tax system that fits its internal market and that supports economic growth and competitiveness, attracts investment, helps to create jobs, fosters innovation and upholds the European social model. Taxation should provide stable revenues for public investment and growth-friendly policies. It should ensure that all businesses enjoy a level-playing field, legal certainty and minimal obstacles when operating cross-border. It should be part of a wider tax system in which citizens have confidence, because it is fair and meets society's socio-economic needs. The EU's priorities in taxation are therefore focussed on these goals.

The Commission has set an ambitious agenda to make corporate taxation fairer and more effective; better adapted to the modern economy and more responsive to emerging challenges in this field. This agenda is advancing rapidly and many important milestones have already been met. All of the initiatives announced in the Commission's Action Plan for Fair and Effective Taxation have now been launched, and many new proposals have already been adopted by Member States. The Commission is also pushing the scope of its work beyond the Action Plan. As shown in the Communication on further measures to enhance transparency and the fight against tax evasion and avoidance, which followed the Panama Papers revelations, it is ready to develop swift and effective responses to issues as they arise. In addition, the Commission has carried out state aid investigations into whether certain Member States granted tax advantages to selected multinational companies, to safeguard a fair and competitive environment for all businesses in the EU.

The Commission's first line of action was to increase tax transparency, as an essential foundation for any further reforms. Within a period of 12 months, Member States agreed on proposals for the automatic exchange of information on tax rulings and country-by-country reports of tax-related information concerning multinationals. This will bring a new and unprecedented level of transparency and cooperation between tax authorities in the area of corporate taxation. The Commission also proposed public country-by-country reporting for multinationals, to provide citizens with greater oversight of companies' tax practices. This proposal, which is currently being negotiated by the Council and the European Parliament, should help restore public confidence in corporate taxation and ensure that businesses are not faced with a patchwork of national public disclosure rules.

A proposal to allow tax authorities access to national anti-money laundering information is expected to be agreed before the end of the year. The European Parliament and Council have also started to work on their positions on proposed amendments to the Fourth Anti-Money Laundering Directive, and should advance swiftly for trilogues to begin by early 2017. In addition, the Commission has started to examine the most appropriate framework to implement the automatic exchange of information on beneficial ownership, at European level, and is exploring the best way to increase oversight of enablers and promoters of aggressive tax planning schemes. This increased tax transparency across Europe will help to expose aggressive tax planners, uncover harmful tax practices and stabilise a corporate tax environment built on openness and trust.

In parallel, the Commission is also working to ensure that all companies operating in the EU pay their taxes where profits and value are generated. This principle is essential for fair and effective taxation, but can only be effectively achieved in a Single Market through common and coordinated measures. Therefore, the Commission proposed a new Anti-Tax Avoidance Directive, setting out legally-binding anti-abuse measures for the entire EU, to block some of the most prevalent forms of base erosion and profit shifting. This legislation, which Member States adopted in July 2016, allowed Member States to implement in a swift, coordinated and coherent way, the commitments they made under the OECD/G20 Base Erosion and Profit Shifting (BEPS) project. Member States' preferential regimes and transfer pricing rules are also being reviewed, to ensure a common EU approach to new international standards. This is critical to provide certainty for businesses as reforms are implemented and to prevent new loopholes emerging in the Single Market.

Finally, the Commission has presented measures to promote tax good governance globally, to ensure a fair and level-playing field between the EU and its international partners. Member States have endorsed the new External Strategy for Effective Taxation, presented by the Commission in January 2016, to protect their tax bases against base erosion risks from abroad. A key component of this Strategy is a new EU listing process, to deal with non-cooperative tax jurisdictions and encourage all third country jurisdictions to meet international tax good governance standards. The first steps in this listing process have already been taken and the common EU list should be finalised in 2017. This will provide Member States with a powerful tool to deal with countries that refuse to play fair in tax matters. The EU's Financial Regulation has also been revised to prevent EU funds from being routed through tax havens, and work is underway to strengthen the tax good governance clauses in EU agreements with third countries.

• Primary Source

ESO: Background information: Commission proposes major corporate tax reform for the EU http://www.europeansources.info/record/commission-proposes-major-corporate-tax-reform-for-the-eu/

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