The European Commission plans to change the way that companies report their profits in an effort to further curb tax avoidance.
The overhaul means that companies would have to calculate profit under common European rules rather than national ones. The objective is to close off the use of crafty cross-border accountancy.
The plan has been on the table for some time but had not made much progress, partly due to opposition from Britain and Ireland.
But now public outrage over low corporate taxation is giving increasing credence to the idea, according the Pierre Moscovici (pictured), Europe’s commissioner for economic and financial affairs.
“We have a strong asset that was not present five years ago – it is the mood in the public and the scandals, which give us some strength. Clearly today the public cannot stand that multinationals do not pay their fair share of taxes, while ordinary citizens did in order to reduce deficits,” he said.
The draft law, known as the common consolidated corporate tax base, will be published in late October or early November.
Under Moscovici’s proposals, companies would have to use a single set of rules on how profit is calculated, but national governments would still be free to decide on the rate of corporation tax.
Ireland has been one of the country’s pushing hard for the freedom to set corporate tax. Its 12.5% rate is one of the lowest in the EU.
The country is also smarting from the Commission’s ruling that it reached a sweetheart tax deal with the US giant Apple.
Moscovici said that the decision was “a watershed moment”, but that it was not targeted against US companies or the Irish government.
“We have sent out a signal that the era of large-scale tax avoidance by multinationals in Europe has ended.”
