Europe needs to tackle tax avoidance

Dec 06 2012 17:58
Brussels - European governments should coordinate their efforts to root out tax avoidance costing them around €1 trillion every year, the European Union's executive body said on Thursday.

The European Commission said member states need to share information better, introduce an EU-wide tax identification number and devise common criteria for blacklisting tax havens.

The proposals were part of an action plan detailed by EU taxation policy commissioner Algirdas Semeta on Thursday to deal with inventive and increasingly common tactics used by big companies and others to reduce their tax bills.

"Tax competition must not open the door to fraudulent or abusive tax practices," Semeta said. A new framework would result in profits being taxed in the state where the "actual economic activity takes place".

The Commission intends to present its action plan to EU finance ministers next year but is not aiming to persuade member states to pass binding legislation.

The impetus to deal with the problem has grown as several European countries try to increase tax revenues and cut spending to rein in heavy debts.

A number of high-profile examples have hit headlines in recent months, including one involving coffee chain Starbucks .

A recent examination by Reuters of Starbucks' accounts showed that the company had reported 13 years of losses at its UK unit, even as it told investors the operation was profitable and among the best performing of its overseas markets.
The chain's UK unit paid no corporation tax on its income in the last three years for which figures were available.

Starbucks said on Thursday it could pay up to $32.18m more in tax as it announced plans to change its accounting practices, surrendering to criticism from lawmakers, campaigners and the media.

A Reuters examination of Amazon's accounts showed how the world's biggest online retailer had minimised corporate taxes by setting up in Luxembourg, and channelling sales through its units there.

In effect, Amazon used inter-company payments to form a tax shield for the group, behind which it has accumulated $2bn to help finance its expansion. Amazon declined to answer questions from Reuters about its tax affairs.

BusinessEurope, the lobby group that represents companies, said it supported the Commission's initiative, but also called for a simplification of the tax system across European Union.

Semeta suggested part of the blame lay on tax regimes "artificially designed to steal tax bases or encourage aggressive tax planning".

He rounded on non-EU state Switzerland as one country whose policies encourage aggressive tax avoidance.

"I can openly say that we consider that several tax regimes in Switzerland, according to our estimations, do not meet criteria of the code of conduct on business taxation," he said.



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
1 comment
Comments have been closed for this article.

Company Snapshot

We're talking about...

Calling all social entrepreneurs - apply for The Venture now!

Are you running an innovative social business that's helping to create a better future? Then pitch for a share of The Venture’s $1m fund and receive world-class mentorship to help accelerate your business growth.

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

New SAA board now has an aviation expert

Previous results · Suggest a vote