European Parliament calls for joint and ambitious position on global tax justice

By agency reporter
December 20, 2019

On 18 December 2019 the European Parliament agreed a resolution calling for a “joint, ambitious EU position” in the OECD-led negotiations on how to address international corporate tax challenges in a digitalised era. These negotiations provide a historic opportunity to adapt corporate tax rules for the 21st century, and to strengthen tax justice at global level.

Reacting to the news, Oxfam’s EU tax policy advisor, Chiara Putaturo, said: “The European Parliament has taken a powerful stand today by calling on the EU and member states to adopt a joint position to advance tax justice. We now urge the OECD, and EU member states around the table, to heed the call of their citizens and fundamentally revise current tax rules. EU governments can, and should, lead in initiating urgently needed reform. They must support an ambitious minimum effective tax rate to stop the race to the bottom on corporate taxation.

“The global tax system is broken. Citizens around the world are protesting unfairness and economic inequality. Governments must respond by ensuring multinationals pay their taxes where they do business and earn profits. Developing and developed countries alike lose billions of euro in crucial tax revenues every single year due to tax avoidance. These revenues are needed to finance vital public services proven to reduce inequality, like healthcare, education and social protection, and to invest in the green transition.”

In 2016 alone over 650 billion dollars of foreign multinational profits were shifted to tax havens. Ordinary citizens worldwide, especially the poorest and most vulnerable, are paying the highest price for this tax avoidance.

In the new resolution, the European Parliament also calls on the Member States to agree on public country-by-country reporting (pCBCR) at EU level to improve tax transparency and make the tax reforms more effective. The pCBCR would require big multinational businesses to make public the profits they make and the taxes they pay for each country in which they operate. Proposed by the European Commission in 2016 and approved by the European Parliament in 2017, the proposal on pCBCR has since been blocked in the Council by several member states.

In May 2019, the OECD/G20 Inclusive Framework launched a new stage of tax reforms called BEPS (Base Erosion and Profit Shifting) 2.0 to address the challenges of taxing multinational corporations in the digital era.

The OECD planned to agree on a framework by the end of January and deliver a final package by November 2020. More than 130 countries are participating in the OECD-led negotiations. These countries now need to agree the outline of a deal before the G20 endorses the final agreement in 2020. 

The European Commission has not expressed a formal position on the proposals but has declared its willingness to cooperate at OECD level to find a consensus. Both the European Commission and the Council are ready to discuss digital taxation in the EU if an agreement is not reached at global level.

The reform package includes two pillars, the first on distribution of taxing rights and the second on a global minimum effective tax rate. In October and November 2019, the Inclusive Framework presented two draft proposals on Pillar 1 and Pillar 2 respectively and opened a public consultation on both.

Oxfam says a global minimum effective tax rate should be set at an ambitious level and applied at a country-by-country basis without exceptions. This would put a stop to the damaging tax competition between countries and remove the incentive for profit shifting – effectively putting tax havens out of business.

* Oxfam International https://www.oxfam.org/en

[Ekk/6]

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