Commission’s Corporate Taxation Plan overtakes global tax negotiations but now Member States must step up to the challenge

Published: 18th May 2021

Today, the European Commission published their “Communication on business taxation for the 21st century”. The plan takes steps to ensure fair and effective taxation, to simplify tax rules for companies and to establish a longer-term business taxation framework.

Chiara Putaturo, Oxfam EU’s Tax expert said: 

“Today’s Commission plan on business taxation is a timely response to the disappointing Amazon tax ruling last week. Big business, especially big tech, pay very little tax but pocket plenty of profit - even during the pandemic thanks to our outdated tax system.

“This new European plan takes one step further than tax negotiations at the global level. While the US has raised the bar on minimum taxation, the EU can now lead the way on unitary taxation by establishing an EU tax base for corporate profits with a reallocation formula among Member States. This, together with clamping down on shell companies, can help efforts to collect taxes in the country where economic activity takes place. By stopping the aggressive race to the bottom in European countries and redistributing tax revenues for public services such as hospitals and schools, we can help bridge the inequality gap.

“With this plan, the EU is setting the pace for global tax reforms. Now it is up to the Commission to deliver upon the actions outlined in the Communication on time and for European countries to step up to the challenge. The unprecedented Covid-19 crisis means the EU must scale up tax cooperation and individual European countries must no longer sabotage the fight against tax dodging. Europe can also do more to raise the bar in global tax negotiations by supporting a more ambitious minimum tax rate and a fairer distribution of revenues to developing countries."


Notes to editors

Today, the European Commission published a “Communication on business taxation for the 21st century”, that includes 5 main actions:

  • a legislative proposal for the publication of effective tax rates paid by large companies
  • a legislative proposal with rules to neutralise the misuse of shell companies for tax purposes
  • a recommendation on the domestic treatment of losses
  • a legislative proposal creating a Debt Equity Bias Reduction Allowance
  • a proposal for a “Business in Europe: Framework for Income Taxation (BEFIT)”, that would include rules for a common tax base and the allocation of profits between Member States based on a formula (formulary apportionment).

The European Commission presented the Common Consolidated Corporate Tax Base (CCCTB), a proposal like BEFIT, in 2011 and in 2016, which was blocked by some Member States. BEFIT will replace the CCCTB.  

In February, the journalistic investigation #OpenLux showed that Luxembourg is hosting 55,000 shell companies with no economic activity. Multinational companies, billionaires and politicians have created these companies for tax avoidance, tax evasion, or money-laundering purposes.

The OECD Inclusive Framework is expected to agree on new rules to redistribute taxing rights (Pillar 1) and on a global minimum effective tax rate (Pillar 2) by July. Pillar 1 will include a proposal for a reallocation of profits but the current proposal only covers a small share of global profits. On Pillar 2 the US administration has proposed a rate of 21%. Oxfam supports an ambitious rate in line with the proposal from the Independent Commission for the Reform of International Corporate Taxation (25%). The current reform proposals of the tax system under discussion at the OECD benefit rich economies more than developing ones.

Last week, the General Court of the European Union overturned a 2017 European Commission decision concerning a case of illegal state aid of Amazon in Luxembourg. The annual account of Amazon Luxembourg shows that, despite skyrocketing sales of €44bn in Europe, the company recorded a €1.2bn loss in their tax returns and paid no tax in 2020 in its European headquarter in Luxembourg.

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