19th November 2015

EU Engages in Tough Debate on Corporate Tax Practices

MEPs grilled eleven multinational companies on their corporate tax practices in a five-hour debate with the Special Committee on Tax Rulings on Monday.

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EU Engages in Tough Debate on Corporate Tax Practices

These companies had declined the committee’s first invitation to appear before it, but later changed their minds and accepted its last chance invitation. Of the 13 original invitees, only Fiat Chrysler and Walmart declined the final invitation. The meeting started with a minute of silence for the victims of the Paris terrorist attacks.
Many questions were about transfer pricing practices (money flows within the same company) and how the firms’ representatives felt about the OECD proposals against base erosion and profit shifting (BEPS). MEPs also floated proposals for mandatory country-by-country reporting on profits, taxes and subsidies and for a common consolidated corporate tax base (CCCTB) on which the EU Commission relaunched a consultation in October. Google was asked about its Bermuda subsidiary, and Facebook was asked why it stored its intellectual property rights on the Cayman Islands.

Most companies insisted that their tax practices were legal and pointed to the large numbers of staff they employ in EU member states. Most were unenthusiastic about the idea of country-by-country reporting, especially if these mandatory reports were to be made public, and objected to the administrative burden that they would impose. But they said that a common consolidated corporate tax base (CCCTB) would be welcome if it made the rules more consistent and clear. Several firms also advocated a binding mediation mechanism in the case of tax disputes.

Six-month extension

Prior to the meeting, Parliament’s political group coordinators decided to ask its political leadership, the Conference of Presidents (EP President and political group leaders), to propose prolonging the committee’s mandate by six months. The coordinators feel that they need more time to access and analyse documents and also to monitor legislative initiatives in the corporate taxation field.

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