EU finance ministers unwilling to address tax avoidance

EU governments are unwilling to tackle large-scale tax avoidance of multinational companies, Oxfam says in reaction to today's formal approval of a new directive which which had been discussed by  EU finance ministers on Friday. Member states watered down measures that could have deterred companies from shifting profits to tax havens.

Oxfam International EU Policy Advisor on Inequality and Taxation, Aurore Chardonnet, said:

“It is outrageous that governments have been unable to agree on an effective approach against parking profits in tax havens while repeated tax scandals are calling for immediate and efficient action. Finance ministers destroyed the European Commission’s proposal, turning the anti-tax avoidance directive into wastepaper.

“Finance ministers are neither listening to their citizens who demand action against tax avoidance, nor to the European Parliament which called for much tougher measures against tax dodging.

“To end the era of tax havens and the tax race to the bottom, we need straightforward and easy-to-implement rules that target companies’ subsidiaries in tax havens. But finance ministers are making it impossible for tax administrations to implement such measures, known as CFC rules.

“What is also needed to end tax dodging are rules that require big companies to disclose where they make their profits and where they pay their taxes. A Commission proposal currently on the table is not sufficient as it limits the requirement to EU countries and a yet to be determined list of tax havens.”

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.

  • The draft deal was struck by EU finance ministers on Friday. However, Belgium and the Czech Republic requested more time to check back with their respective governments. They did not object the deal until Monday wherefore it is now formally approved.

  • Controlled Foreign Company (CFC) rules are a crucial measure against profit shifting into low-tax jurisdictions. If the income of a company’s subsidiary abroad is taxed at a low effective rate or not taxed at all, then CFC rules apply and the tax authority of the company’s home country taxes the income of the foreign subsidiary. The main aim of CFC rules is to discourage profit shifting to tax havens which should benefit both developed and developing countries.

  • The new measures decided by EU finance ministers today will oblige tax administrations to prove that profits parked e.g. in Bermuda or the Cayman Islands are artificial. Companies could avoid paying taxes by simply employing a single person in a tax haven.

  • On 8 June, the European Parliament voted for progressive anti-tax avoidance measures, including efficient CFC rules

  • On 12 April, the European Commission released a proposal on tax transparency which limits public country-by-country reporting to the EU and an arbitrary list of tax havens.

  • In May 2016, Oxfam released “The Netherlands: a tax haven”, an analysis of European Commission data showing the Netherlands is a top EU tax haven for corporations. Of 33 harmful tax practices listed by the Commission, 17 were identified in the country currently holding the EU presidency.

  • 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.

  • The “World Investment Report” of the United Nations Conference on Trade and Development (UNCTAD) estimates that developing countries lose at least US$100 billion per year in corporate tax revenue due to tax dodging by large companies.

Contact information: 

Florian Oel, florian.oel@oxfaminternational.org, t +32 2 234 11 15, m +32 473 56 22 60

For updates, please follow @Oxfam and @OxfamEU