European Corporate Tax Policy since the Crisis: How the EU steps up the Fight against Corporate Tax Avoidance (original) (raw)

The Future of the Corporate Income Taxation in the European Union

2005

The future of capital income taxation in the European Union (EU) hinges importantly on the future of the corporation tax. No doubt, schedular capital (income) taxes on real estate and the earnings of small-businesses will be around for a long time to come, but the base of a comprehensive capital income tax requires the inclusion of corporate earnings, i.e. profits, interest and royalties. Capital income taxation, broadly defined, will wither if the body politic does not want to tax corporate earnings, either deliberately or by ignoring the policy and administrative issues that arise in a globalised capital market. Accordingly, this paper focuses mainly on corporation tax (CT) regimes. The future of the corporation tax starts now. Therefore, Part B surveys and evaluates the actual CT regimes in the EU to see whether they yield any clues about what the future may hold in store. The survey starts with an analysis of corporation-income tax relationships in the Member States centered on the treatment of distributed and retained profits. Subsequently, there is a comparison between nominal tax rates on various forms of capital income (retained profits, dividends, interest) and labor income. This is followed by a review of the most important tax base features, including the use of tax incentives. Finally, there is a discussion of a number of technical aspects that bear on the enforcement of the taxation of corporate earnings. A rather crazy quilt of CT systems emerges of widely diverging tax bases and tax rates. Tax competition forces are clearly at work. Indeed, the future of capital income taxation in the EU does not look very rosy, unless some form of tax coordination can be found. 1 1 It is often said that rate reductions have not been accompanied by commensurate declines in corporate tax revenues. However, this does not account for the secular rise in profits nor for the greatly increased share of economic activity that is conducted in corporate form. These two factors should have resulted in a rise in corporate tax revenues. WORKSHOPS NO. 6/2005 165 THE FUTURE OF THE CORPORATE TAXATION Under the EU treaty, the Member States do not have to harmonize their CT rates or bases. Harmonization is to be "approximated" only if required for the functioning of the internal market. So far, CT harmonization has been confined to various measures aimed at promoting cross-border business cooperation between related companies 2 and to administrative assistance. 3 Furthermore, in 1997, a nonbinding Code of Conduct on Business Taxation, purporting to curtail 'harmful tax practices' by the Member States, was adopted (European Commission, 1997). These practices have regard to the tax-favored provision of financial services to third parties, intra-group financing and the licensing of intangible property in return for royalty payments. (They mirror the treaty ban on state aid to private enterprise.) Beyond this, regulations exist on the statutes for a European Company and a European Economic Interest Grouping. 4 The case for further tax coordination seems strong. Greater approximation of capital income tax systems could promote investment, improve the tax burden distribution and, last but not least, reduce compliance and administrative costs. While the normal return on mobile capital cannot be taxed at the same high rates as labor income, tax coordination should enable the Member States to capture some of that return. After all, capital is less mobile in the EU as a whole than between individual states. Tax coordination should also make it possible to tax firm-specific rents more effectively (although not at the same high rates as location-specific rents, if separately identifiable). Furthermore, there is no reason why foreign shareand bondholders should be completely exempt from tax. Beyond that, the CT is Admittedly, some of the revenue foregone has been made up by various base broadening measure. 2 These measures comprise the parent-subsidiary directive (90/435/EEC, amended by 2003/123/EC) which eliminates the double taxation and withholding taxes on dividends paid to defined parent companies, the merger directive (90/434/EEC amended by COM(2003)613final) which suspends the taxation of capital gains on defined crossborder mergers or reorganisations), and the interest-royalty directive (2003/49/EC) which eliminates withholding taxes on interest and royalty payments between defined related companies. The European Commission has also indicated that a new proposal on crossborder loss-relief will be issued in the near future (COM(2003)614final). Finally, mention should be made of Directive 69/335/EEC, which obliges Member States not to levy capital duty on the issuance of new shares at a rate exceeding 1%. 3 This has resulted in the mutual assistance directive (77/799/EEC amended by 2004/56/EC) on the exchange of tax information between Member States, and the arbitration convention (90/436/EEC extended by protocol (OJC202/01) of 16 July 1999) on the resolution of the double taxation of profits if adjustments are made to transfer prices by one Member State which have consequences for the amount of taxable profits in other Member States.

THE PERIPATETIC NATURE OF EU CORPORATE TAX LAW

Deakin Law Review, 2019

This article examines some aspects of the European Union's corporate tax setup which correspond to aspects of a country's corporate tax regime. The overarching question is whether there is such a thing as EU corporate tax law. This article seeks to address this in the context of the following issues: the existence of a uniform tax base and tax rates; the existence of anti-abuse rules and a transfer pricing regime; and, finally, the existence of a common tax administration and its powers. The article questions whether the peripatetic development of EU corporate tax law is suitable for the EU or whether it undermines its long-term objectives. The potential impact of Brexit in the development of EU corporate tax law is also addressed.

Corporate Income Tax Avoidance in the European Arena - Evidence and Remedies

2015

According to the OECD, 4% to 10% of the global corporate income tax revenue, i.e. USD 100 to 240 billion annually, is lost due to corporate income tax avoidance (OECD, 2015). Although the existence of the issue is well-accepted by the tax policy makers of the developed world, it is extremely difficult to agree on an international tax policy standard which could reduce the vulnerability of the sovereign tax regimes. In this article, we summarize the historical background of corporate income tax avoidance, and provide evidence of its existence in the EU member states. In addition, we also examine a new international income tax model proposed by the European Commission and analyse the expected effects of the proposal onthe risk associated with tax avoidance in Europe.

Corporate Income Tax Avoidance in the European Arena

Theory, Methodology, Practice, 2015

According to the OECD, 4% to 10% of the global corporate income tax revenue, i.e. USD 100 to 240 billion annually, is lost due to corporate income tax avoidance (OECD, 2015). Although the existence of the issue is well-accepted by the tax policy makers of the developed world, it is extremely difficult to agree on an international tax policy standard which could reduce the vulnerability of the sovereign tax regimes. In this article, we summarize the historical background of corporate income tax avoidance, and provide evidence of its existence in the EU member states. In addition, we also examine a new international income tax model proposed by the European Commission and analyse the expected effects of the proposal onthe risk associated with tax avoidance in Europe.

Corporate income tax coordination in the European Union

Transfer: European Review of Labour and Research, 2010

The globalisation of economic activity and the growing importance of multinational corporations have far-reaching consequences for national tax policies. Since 1995, the average corporate tax rate in the EU has fallen from 35% to 23%. In addition, differences and incompatibilities between the national systems of corporate income taxation distort investment, complicate the tax system and give rise to conflicts between taxpayers and tax authorities as well as between tax authorities of different countries. Given this, there is a widespread view that greater coordination of corporate taxation is required. Recently, the European Commission proposed introducing a Common Consolidated Corporate Tax Base (CCCTB) in Europe. This article discusses the economic advantages and the drawbacks of the CCCTB concept.

Corporate Income Tax Rates in the EU Member States: Why Lower Means Better

e-Finanse

Governments of EU Member States have been reducing statutory corporate income tax rates (“CIT”) for several years. What encourages them to take part in tax competition? The article discusses several issues which are in favor of lower CIT rates. They are selected based on their relevance. The study is performed with use of data available from applicable statistical bodies/literature and is based on literature review (especially in cases where required data is not available). It seems that the commonly raised issue of rivalry for capital in the globalizing world economy with highly mobile capital could be only one of a number of reasons for CIT rate depression. Tax competition is fueled by the various sizes of the economies of EU countries as well. The following important rationale may include the aspiration of governments to curb the local shadow economy. There are also some issues of a more theoretical nature that explain decreasing CIT rates. They include: (i) the necessity to acco...