Facebook and Google to be grilled by MEPs over tax

Mark Zuckerberg, creator of Facebook. [Robert Scoble]

In a last minute move, Facebook and Google announced Friday (23 October) that they will appear before the European Parliament next month to be grilled by MEPs on their controversial tax arrangements, Parliament officials said.

The hearing, on November 16, is part of legislators’ efforts to strengthen new rules to control the corporations’ accounts.

Their participation came after the Commission and a group of MEPs redoubled their pressure on the corporate world to be more transparent with their tax arrangements. The Socialist delegation banned a group of 14 companies, including Facebook and Google, from meeting with members of the group. These firms had declined previously an invitation to appear before the Special Committee on Tax Ruling. Amazon, AB InBev, Barclays, Coca-Cola, Fiat, HSBC, IKEA, McDonald’s, Philip Morris, Walmart and Walt Disney were also included in the list.

Airbus, BNP Paribas, SSE plc and Total accepted the Parliament’s invitation and replied to the legislators’ questions before the summer break.

>>Read: Parliament tax committee threatens to blacklist uncooperative lobbyists

The Socialists reacted cautiously to the news. Asked if these companies would be removed from the ‘black list’, a spokesperson said: “we are waiting to see if the companies come to the hearing”. Facebook and Google representatives confirmed to EURACTIV that the companies will take part in the hearing, with no further details on who will represent the firms. 

Meanwhile, the Commission took the first step against the benign tax rulings for Starbucks in the Netherlands and Fiat in Luxemburg, seen as illegal advantages according to the EU law. Commissioner for Competition, Margrethe Vestager’s decision represents the beginning of the end of a period of lax tax burden granted to multinationals by some member states. The investigation is still ongoing for other big firms such as Apple and Amazon.

>>Read: Brussels orders EU countries to claw back ‘illegal’ tax rulings

The members of the Special Committee were frustrated with the companies’ refusal to appear before them as the committee’s work is nearing its end. The coordinators of the committee decided last week to give “one more chance” to the corporations. “I hope that, this time, multinational companies will seize the opportunity”, the Committee Chairman Alain Lamassoure, said, as the MEPs are “very keen to hear their take” on the current developments in the tax world.

The hearings with the representatives from Facebook and Google will take place on 16 November. Before that, the committee will vote its own conclusions on 26 October. Possible amendments after the exchange of views could be added to the report, drafted by the Socialist Elisa Ferreira (Portugal) and the liberal Michael Theurer (Germany), before the text is voted in the plenary session in late November.

Although the final version of the report is still under preparation, with more than 1,000 amendments tabled, the Parliament wants to call for stricter rules to oversee how the companies handle their taxes. Parliament sources told EURACTIV that the MEPs will be “critical” about the recent agreement on tax rulings. They consider it is insufficient as the Commission will have only limited access to the information sent between the members states on the tax rulings granted to the multinationals. The legislators consider that the Council weakened an already light proposal put forward by the EU executive.

The report will propose common definitions for the Common Consolidated Corporate Tax Base (CCCTB), a minimum corporate tax rate, a recommendation for better protection of whistleblowers, who become critical to unveil the so called ‘Luxleaks’ scandal.

The Parliament will also insist on the need for the companies to follow a country by country reporting of their tax schemes and profits. This issue remains controversial as some groups such as the business-friendly EPP consider that national reporting could bring an excessive bureaucratic burden for the companies.

The country-by-country reporting is already compulsory for banks, while it has been included in the shareholder’s right directive, currently being negotiated between the member states and the MEPs. Officials pointed out that an important number of EPP members supported the stricter reporting when the legislative proposal was voted in the plenary.

The special committee’s conclusions will be the basis of a legislative own initiative report, to be voted on 1 December, and drafted by the conservative Ludek Niedermayer and the socialist Anneliese Dodds. According to the procedural rules, the Commission is obliged to respond by adopting a new piece of legislation or amending an existing one, which would add more initiatives to an already loaded agenda on the fiscal front.

The fight against tax evasion is one of the Juncker Commission's main priorities. News of the systematic, state-sanctioned tax evasion practices of many multinationals based in Luxembourg, known as the Luxleaks scandal, broke shortly after the new Commission was sworn in.

On 18 March, the executive presented a package of measures aimed at strengthening tax transparency, notably by introducing a system for the automatic exchange of information on tax rulings between member states. 

The so-called Tax Transparency Package will force the EU's 28 member states to share details of any tax deals agreed to with some of the world's biggest multinationals, in information sent automatically every three months. The plan aims to end the secrecy that allowed member states to often compete against each other to attract business and investment.

It does not however question the perfectly legal practice of offering companies tax rulings, the executive said, this being the strict responsibility of member states.

Activists criticised the fact that the tax ruling would remain out of the public eye, remaining privileged information for tax authorities.


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