European Commission half measures will exacerbate profit shifting

17th June 2015 – for immediate release

European Commission half measures will exacerbate profit shifting

Today’s Action Plan on Fairer Taxation sees the European Commission stall on transparency while giving tax sweeteners to multinational companies

BRUSSELS—While the European Commission’s (EC) corporate tax plan offers some warm words about confronting corporate profit shifting, it makes important concessions to multinational companies and delays implementing transparency measures.

The Action Plan proposes a number of new tax tools for businesses, including an option to offset profits made in one country with losses in another.

John Christensen, Director of Tax Justice Network, commented: “The European Commission is offering multinational corporations the best of both worlds, and the public will be the losers: the Commission proposes to allow cross-border offset of losses without preventing intra-group profit shifting. This widens the possibilities for tax avoidance.”

The second major failing in the Commission’s proposals is the suggestion of yet another public consultation on the merits of public Country-by-Country Reporting by multinational companies.

“Making country-by-country reporting public is crucial for the accountability of both multinationals and tax authorities”, said TJN’s senior analyst Markus Meinzer. “The Commission’s own report, from a big 4 accounting firm no less, made this recommendation. The proposal for a further consultation is simply prevarication, and entirely inconsistent with the rhetoric of cracking down on tax avoidance.”

Meinzer continued: “Commission President Juncker, who himself presided over the major growth of abusive practices in Luxembourg, must know that the eyes of the world are upon him now.”

The Action Plan, released today, outlines a number of objectives, most notably the importance of making sure there is a link between where a corporation is taxed and where its genuine economic activity takes place. The LuxLeaks investigations revealed the extent to which multinational companies have been concocting secret tax deals with Luxembourg to reduce their effective tax burdens, sometimes to less than 1 per cent. While accepting that such deals cause economic distortions, the Action Plan falls far short in its recommendations on how to tackle the problem.

Read the EC’s Fact Sheet on the Action Plan here.

Contacts:

John Christensen tel +44 79 79 868 302
Markus Meinzer tel +49 178 340 5673