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EU Anti-Tax Avoidance package will fail to end the era of tax havens, warns Oxfam
Despite EU intentions to crack down on tax avoidance, the European Commission’s Anti-Tax Avoidance Package does not do what it says on the tin, warns Oxfam, and developing countries will feel the EU’s failure most.
The package comes a week after the international NGO revealed that just 62 people own the same amount of wealth as the poorest half of the world.
Oxfam International EU Policy Advisor on Inequality and Taxation, Aurore Chardonnet, said:
On the ATAP package
“Expectations were high following ambitious statements by the EU Tax Commissioner Pierre Moscovici on the urgent need to address tax avoidance. But while corporate investment in tax havens has quadrupled since 2000, the Commission has lowered its reform ambitions. This raises the question of how serious the EU is about cracking down on tax avoidance.
“After the OECD’s failure to come up with adequate solutions against tax avoidance, the European Commission is now choosing the lowest common denominator-approach, which is very disappointing. The EU executive is certainly under pressure from nervous member states that have left open loopholes for companies to engage in aggressive tax planning. But citizens rightly expect more from the EU, which claims it wants to lead by example.
“It is ironic that this Anti-Tax Avoidance package will be discussed under the Dutch EU presidency since – as illustrated by the Starbucks case, the Netherlands is a tax haven. If EU member states, and especially the current Council presidency, are committed to ending the era of tax havens, they need to stop being hypocrites.”
On Controlled Foreign Company (CFC) rules
“Suggested rules taking aim at subsidiaries in tax havens will actually reinforce tax competition between EU countries. Given the low rates of corporate income tax in some countries, the current proposal implies that a corporate tax rate of 4% is good enough for the Commission. In Oxfam’s view, it categorically is not good enough.”
On the external strategy countering tax havens
“The external strategy aimed at listing and targeting tax havens outside the EU is a welcome improvement, but this is a non-binding text. This means its implementation depends on the goodwill of member states – some of which are tax havens - so confidence in this can only be low.
The EU needs to apply the same criteria to identify tax havens inside the Union as it does outside. At the very least, it needs to get its own books in order, acknowledge the devastating effects of extreme tax competition and tax havens on developing countries as they alone lose at least $100 billion annually.”
On country-by-country reporting
“The Commission’s proposal to adopt the OECD rules for confidential country-by-country reporting should not end there. Tax transparency is essential for holding multinationals to account for their tax practices, and it is key for developing countries to scrutinise global tax arrangements of corporations operating in their territories. Without public country-by-country reporting, we will never see an end to the era of tax havens.”
- Today, 28 January 2016, the European Commission released its Anti-Tax Avoidance Package (ATAP), a set of initiatives aiming at enhancing effective taxation and transparency in the European Union and beyond.
- A brief Oxfam analysis of the new tax package is available on our website.
- The package builds on the Base Erosion and Profit Shifting (BEPS) project on international tax reforms launched by the Organization for Economic Cooperation and Development (OECD) in 2013 that was endorsed by the G20 in November 2015. The measures aim to tackle practices used by large companies to avoid taxation and to ensure that profits are “taxed where economic activities deriving the profits are performed and where value is created.”
- The new tax package is composed of:
- A proposal for an Anti-Tax Avoidance Directive which implements most G20/OECD anti- tax avoidance measures following the recommendations of the BEPS project.
- A proposal for a Directive implementing the G20/OECD Country-by-Country Reporting (CbCR)
- A recommendation on tax treaty issues
- A communication on an external strategy regarding tax havens
- A staff working document which provides further analysis and supports these initiatives
- A first Tax Transparency Package (TTP) was released on 18 March 2015 by the European Commission. On 17 June 2015 it published a plan for a fair corporate tax system in the European Union. It is now undertaking an impact assessment on the benefits of public country-by-country reporting following a 3-months public consultation. This reporting standard would require multinational companies to publicly reveal in which countries they make their profits, where and how much they pay in taxes. The assessment is expected to be released in March.
- On January 18, Oxfam published the report “An economy for the 1%”, revealing that the 62 richest people own as much as our planet’s poorest 50 percent. It also shows that the richest 1% of the world population owns more than the rest of us combined. The briefing paper explores the role of tax havens in the rise of inequality, highlighting that corporate investment in tax havens almost quadrupled between 2000 and 2014 and that nine out of ten large companies have at least one subsidiary in a tax haven.
- In March 2015, Oxfam published “Pulling the Plug – How to stop corporate tax dodging in Europe and beyond”, a briefing note that explores ways to fight corporate tax avoidance in the European Union. It explains why it is vital for the EU to adopt legislation against tax dodging as soon as possible.
- In November 2015, Oxfam and three other organizations jointly published "Still Broken: Governments must do more to fix the international corporate tax system", a briefing note that points out why the OECD BEPS package is not enough and calls for a more effective approach against corporate tax havens.
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