The Net Closes in on Tax Dodgers but There’s No Room for Complacency
European Parliament report is a big step forward, but the pressure must be maintained to get concrete measures to stop tax dodging.
On 25 November in Strasbourg, the European Parliament passed a report by a large majority that marks a milestone in the institution’s fight for tax justice. This was in spite of its limited powers in this area as well as the uncooperative attitude of governments, the Commission and large multinational companies.
The TAXE report is a damning indictment on member states who have violated basic EU rules and principle of genuine cooperation by granting multinationals secret tax deals. This has allowed companies earning mutli-million euro profits to pay tax rates of as low as 1%. This has not only given preferential treatment to some taxpayers over others, illegal under European law, but it has also encouraged multinationals to relocate to these low-tax countries, thus depriving other European states of tax revenue.
The report also sets out a series of recommendations on stopping this institutionalised corporate tax dodging. It commends the recently agreed Automatic Exchange of Information (AEoI) on tax rulings and the moves towards country-by-country reporting on tax for multinationals. But it rightly calls for these to be strengthened and, most importantly, made public, so that citizens know how much companies operating in their country contribute.
At EPSU, we’re particularly happy to see that the report makes the important point that cuts to staff in tax administration have encouraged tax avoidance. Across Europe there was an average 10% reduction in personnel working on tax collection between 2008-2012, a trend that shows little evidence of changing. These cuts shouldn’t just be stopped, but reversed. Every euro, pound or krone invested in tax authorities brings back many times that in revenue.
McDonald’s, a company that dodged €1 billion of tax across Europe between 2009 and 2013, gets a special mention for employing a corporate structure so suspiciously complicated that their own vice-president for tax, Irene Yates, seemed unable to explain it when she appeared in front of the committee. Nor could she state the effective corporate tax rate that Luxembourg grants the global fast-food giant, which according to the Unhappy Meal report is as low as 1.46%.
The TAXE committee is to get another 6 month extension. This will help keep up the political pressure on national governments and the European Commission to take serious action to stop harmful tax competition that leads to this industrial-scale tax dodging.
When the 11 multinational companies eventually turned up to the committee’s hearings, under the threat of having their lobbyists' accreditation to the European Parliament revoked, their arrrogant evasiveness posed more questions than answers. If these byzantine corporate structure are not in place to dodge tax, then the multinationals should come to the new committee and explain what purpose they do serve. So far, there have been no answers as to why, for example, these companies have subsidiaries in tax havens or why they shift intellectual property payments between multiple countries.
The good work of the TAXE committee can’t be undone by inaction. An extension will help, but trade unions, civil society and politicians must fight to keep tax at the top of the political agenda. That’s the only may we’ll make sure these corporate giants start paying their fair share.