The German, French and Italian finance ministers have urged the European Commission to draw up EU-wide laws to curb corporate tax avoidance and prevent member states from offering lower taxes to attract investors.
In a letter to economics and tax commissioner Pierre Moscovici, the ministers of the eurozone’s three biggest economies called for a comprehensive anti-BEPS (Base erosion and profit sharing) directive for member states to adopt by the end of 2015.
“This strong initiative taken by the EU, which could be proposed by the end of 2014, would give Europe the leading place it deserves at the international level,” said the letter, signed by Germany’s Wolfgang Schäuble, France’s Michel Sapin and Italy’s Pier Carlo Padoan.
“Our citizens and our companies expect us to cope with tax avoidance and aggressive tax planning. It is our common duty to meet their expectation by ensuring that everyone pays their fair share of tax to the state where profits are generated,” said the letter.
Luxembourg is defending itself against allegations of sweetheart deals between multinationals and tax authorities. New European Commission President Jean-Claude Juncker, a former Luxembourg prime minister, has said he will fight tax evasion with a greater automatic exchange of information.
The Luxembourg affair highlighted how companies exploit tax competition among EU member states to pay less.
“Since certain tax practices of countries and taxpayers have become public recently, the limits of permissible tax competition between member states have shifted. This development is irreversible,” the ministers said in their letter.
Earlier this year, French President François Hollande said he wanted “harmonisation with our largest neighbours by 2020.” The first step, outlined in a report the French Council of Economic Analysis (CAE) earlier this year, is to continue efforts for a common consolidated corporate tax base (CCCTB).
>> Read: Common EU tax system should start with the banking sector, French advisors say
In Brussels, the European Commission has said it will work on preventing such competition in the future by trying to pass a proposed CCCTB law, which is currently stuck in the EU Council of Ministers. Any agreement on taxation requires unanimity at the European level, which makes a deal on the CCCTB virtually impossible.
The three ministers also noted the OECD and Group of 20 countries had an anti-BEPS initiative and said the EU should also adopt a common set of binding rules.
These should encompass mandatory and automatic exchange of information on cross-border tax rulings, including transfer pricing, a register identifying beneficiaries of trusts, shell companies and other non-transparent entities and measures against tax havens.
