The European Parliament adopted by 508 votes to 108, with 85 abstentions a resolution on tax rulings and other measures similar in nature or effect.
To recall, the LuxLeaks scandal, which erupted on 5 November 2014, revealed the extent of the use of secret deals featuring complex financial structures designed to obtain drastic tax reductions. In many cases Luxembourg subsidiaries handling hundreds of millions of euros in business maintained little presence and conduct little economic activity in Luxembourg.
The scandal brought public and media attention to those issues, disclosing questionable tax practices promoted by accountancy firms in one specific Member State. Members noted the Commissions investigations and the work carried out by Parliament through its special committee had shown that this was not the only case, but that taking tax measures to reduce some large corporations overall tax liabilities so as to artificially increase the national tax base at the expense of other countries, some of which were subject to austerity measures, was a practice that was widespread within Europe and beyond.
Parliament considered that subjecting these practices to public scrutiny was part of democratic control.
It discussed corporate tax practices and aggressive tax planning, and noted the following:
Bearing this in mind, Parliament made the following recommendations:
Tax gap: Parliament called on the Commission to more thoroughly address corporate taxation issues, including harmful tax practices and their impact, in the framework of the European Semester and for relevant indicators, including estimates of the tax gap arising from tax evasion and tax avoidance, to be included in the macroeconomic imbalance procedure.
Cooperation and coordination on advance tax rulings: Parliament deplored the content of the political agreement of 6 October 2015 within the Council, which falls short of the Commissions legislative proposal of March 2015 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation. It called on the Council to stick to the Commissions proposal and take due account of the Parliaments opinion thereon, in particular as regards: (i) the scope of the directive (all tax rulings instead of cross-border only), (ii) the retroactivity period (all tax rulings still valid should be exchanged) and (iii) the information provided to the Commission, which should have access to the tax rulings.
Parliament reiterated its position that MNCs in all sectors should disclose comprehensibly in their financial statements, broken down by Member State and by third country in which they have an establishment, a range of aggregate information, including their profit or loss before tax, taxes on profit or loss, number of employees, assets held, basic information about tax rulings (country-by-country reporting).
Common Consolidated Corporate Tax Base (CCCTB): whilst welcoming the action plan proposed by the Commission on 17 June 2015 to address tax avoidance, the report called on the Commission to speed up work on a compulsory EU-wide Common Consolidated Corporate Tax Base (CCCTB), which would address not only the issue of preferential regimes and mismatches between national tax systems, but also most of the issues leading to tax base erosion at European level (in particular transfer pricing issues). It also called on the Commission to:
State aid: Parliament underlined the fact that some harmful tax practices may fall within the scope of tax-related state aid rules, in so far as that they can, grant selective advantage and entail distortions of competition within the internal market. In this regard, it called on the Commission to:
Code of Conduct Group: Parliament deplored the fact that the work of the Code of Conduct Group on Business Taxation work seems to have lost momentum, noting that tax authorities have countered the Groups recommendations by creating new structures with the same harmful effects as those rolled back by the Group.
Members called for an urgent reform of the Code of Conduct on business taxation and of the Group responsible for its enforcement, given that, to date it has proved to be of questionable value. The reform should aim to address both real obstacles currently in the way of effectively tackling harmful tax practices and an EU-wide coordination and cooperation on tax policy.
Protection of whistleblowers: Parliament called on the Commission to propose, by June 2016, an EU legislative framework for the effective protection of whistleblowers and the like. It stressed that it is not acceptable that citizens and journalists can be subject to prosecution rather than legal protection when, acting in the public interest, they report suspected illegal activity, in particular in cases of tax avoidance, tax evasion and money laundering. The Commission was asked to consider a range of tools for ensuring such protection against unjustified legal prosecution, economic sanctions and discrimination.
Exchange of information: Parliament found that Member States did not comply with the obligations set out in Council Directives 77/799/EEC and 2011/16/EU on enhanced administrative cooperation in the field of taxation. Member States did not and continue not to spontaneously exchange tax information, even in cases where there were clear grounds, for expecting that there may be tax losses in other Member States, or that tax savings may result from artificial transfers of profits within groups. Parliament deplored the fact that the current legislative and monitoring framework for the exchange of information about tax measures is not effective, and that practically no Member State exchanges any information which may have an effect on partner countries of the EU. It took the view that, among other things, a comprehensive, transparent and effective automatic exchange of tax information and a mandatory common consolidated corporate tax base are essential preconditions for achieving a tax system at EU level that complies with and preserves the basic principles of the internal market. The Commission is asked to use all the tools at its disposal to foster a more coordinated approach vis-à-vis developed countries in order to promote greater reciprocity in tax matters.
Tax havens: Members discussed the shifting of profits to low- or no-tax or secrecy jurisdictions where, often, no substantial economic activity takes place, deploring the lack of a coordinated approach on the part of the Member States vis-à-vis all those jurisdictions. They called on the Commission to:
European Taxpayer Identification Number: lastly, Parliament called on the Commission to put forward a proposal for a European Taxpayer Identification Number (TIN) based on the outline for a European TIN in the Commissions Action Plan on the fight against tax fraud and tax evasion of 2012.