Commission hits the gas, but tax reform must go alongside investigations, Oxfam says

The European Commission today opened a state aid probe into the tax deal between Luxembourg and the French energy company Engie (formerly GDF-Suez). Oxfam’s EU policy advisor on inequality and taxation, Aurore Chardonnet, said:

“It is a good sign that the European Commission pursues its efforts to put an end to damaging tax deals despite the criticism it faced following the Apple ruling three weeks ago. The fact that another European company is now under investigation shows that this is not only about US companies, but that tax dodging is a systemic problem of global scale.

“These investigations are currently the only way to shed a light into secret tax deals struck between governments and large companies such as Fiat, Starbucks, Apple, McDonald’s and now Engie. Harmful and unfair tax practices allow the biggest firms to pay minimal corporate tax, reducing funds available to governments to invest in public services which are key to reducing inequality.”

“However, this one-by-one approach of the European Commission is not an efficient way forward to countering tax avoidance. Oxfam calls on governments inside and outside the European Union to engage in effective legislative reforms towards a fair tax system, including transparency by governments on tax rulings and an obligation for companies to reveal key data like the profits made and the taxes paid in each country they operate.”

Notes to editors: 
  • Oxfam fights for global tax justice because companies, like all of us, must pay their fair share of tax. Tax revenues are needed to support essential public services, including health care and education, both in developed and in developing countries.
  • Tax rulings determine, in advance of intra-group transactions, the amount of tax to be paid by the company.  According to the European Commission, tax rulings may involve state aid within the meaning of EU rules if they are used to provide selective advantages to a specific company or group of companies.
  • In the newest Engie case, the Commission is investigating a so-called “hybrid mismatch”. Hybrid mismatches involve legal entities of companies or financial instruments that are treated differently under the rules of different countries. For instance, an entity could be a partnership or a company, while a financial instrument could be a loan or an equity contribution. Hybrid mismatches can be used to shift profits out of a country into another one so that they remain untaxed. In this specific case, the Commission has identfied "double non-taxation for both lenders and borrowers [within the same company group] on profits arising in Luxembourg".
  • Luxembourg is also being investigated for tax rulings regarding Amazon and McDonalds.
  • Oxfam advocates for tax reform that ensures transparency by governments on tax rulings. The organisation also calls for so-called country-by-country reporting rules where multinational companies have to disclose their profits earned, taxes owed and taxes paid, the number of employees and their turnover, as well as an overview of their economic activity, for every country where they have subsidiaries.
  • The March  2015 Oxfam briefing note “Pulling the Plug – How to stop corporate tax dodging in Europe and beyond”  explores some of the solutions for fighting corporate tax avoidance in the European Union.
Contact information: 

Florian Oel | Brussels | florian.oel@oxfaminternational.org | office +32 2 234 11 15 | mobile +32 473 56 22 60

For updates, please follow @Oxfam and @OxfamEU