21st April 2017
EU tax commissioner, Pierre Moscovici, has urged EU finance ministers to continue reforming corporate rules to tackle tax avoidance, as some smaller countries call for slower reform to avoid scaring away big corporations. In response to a paper recently discussed at a meeting of EU finance ministers, Malta – which currently holds the EU Chair – said EU tax reforms would increase uncertainty, harming investment and trade and that states should be given more time to adapt to changing rules.
Tax reform is crucial in the fight against tax avoidance
In an opposing statement, Moscovici said the biggest source of uncertainty would be to maintain the existing “status quo”, where EU states compete with one another on corporate tax policy. Moscovici urged ministers, “We must finish what we have started,” stressing that the pace of reforms should remain “fast”.
A number of large U.S. corporations have set up their headquarters in smaller EU states in recent years, allowing them to cut their tax bills due to more relaxed rules. However in response to recent global scandals, such as the release of the Panama Papers, the European Commission has put forwards a series of legislative proposals to close legal loopholes which allow global corporations to exploit tax benefits in smaller EU states.
However Malta has rejected claims it’s trying to slow efforts to clamp down on multinational tax avoidance by raising concerns about the pace of reforms, instead insisting that companies have the right to tax certainty when making investments and setting up subsidies. Belgian finance minister, Johan Van Overtveldt, echoed Malta’s sentiment suggesting that the nation was right to stress that the pace of reforms should not be “too fast”.
Support from major economies in the fight against tax avoidance
Meanwhile, German finance minister Wolfgang Schaeuble stressed that calls for more tax certainty “cannot be an excuse” to slow down the EU fight against tax avoidance. Dutch finance minister JeroenDijsselbloem, who has taken a strong stance on the need to clamp down on evasion in the Netherlands, also sided with Moscovici saying “Let’s not get soft on tax avoidance.”
While some smaller economies are clearly still opposed to the pace of current tax reforms, it’s becoming an unavoidable issue, with scandals such as the Panama papers and Credit Suisse highlighting the need for greater transparency and unity when tackling tax evasion. However Malta’s stance on tax reform does draw attention to the need to be certain about the tax regulations of individual countries in the EU.If you’re at all unsure about your status, or that of the contractors you’re placing in unfamiliar regions, then ensure you partner with a specialist before it’s too late.