In October 2015, the European Commission already declared illegal so called “tax rulings” passed for multinational companies such as Starbucks, Amazon or Apple in countries like Holland or Luxemburg.
The term “tax rulings” is used as a preliminary form of advising companies regarding the taxes they are to pay. It is not exactly an illegal practice, however, when complicated regulations are used to give advantages to some companies, legality is abandoned. Margrethe Vestager, the European Commissioner for Competition, explained that “profits were distributed within the same group from one company to another”. Such regulations harm companies which pay their taxes legally.
Given that multinationals benefited from the advantages provided by the “tax rulings”, on 21st October 2015 the European Commission decided that Starbucks and Fiat should make a supplementary payment of 20 and 30 million Euros each, given that the “tax rulings” artificially reduce the amount of taxes to be paid and are not compatible with the regulations governing subsidies in the European Union.
Consequently, the European Commission ordered Luxemburg and Holland to demand the respective multinational companies to pay the unpaid taxes.
On 6th July 2016, the European Parliament took the matter up again and published its proposals, also as a reaction to the Luxleaks case, which involved the aforementioned practices in Luxemburg.
The parliamentarians voted in favour of a list of measures with the objective of promoting the fight against tax evasion. The members of Parliament demanded the implementation of a black list for tax havens, as well as sanctions against tax advisors, lawyers and banks who promote tax evasion and collaborate with tax havens.
The proposals were introduced by Michael Theurer (ALDE, Germany) and Jeppe Kofod (S&D), Denmark in the plenary session for the special committee “Tax Rulings II” and were accepted by 514 to 68 votes. There were 125 abstentions.
According to Mr. Theurer “the dumping of taxes is carried out at the expense of small and medium size companies, which are the backbone of the European economy. In a fair tax system, multinationals should pay their share in the place where they obtain their earnings.”
With the proposals accepted, Europe has taken a step in the right direction, making way for a black list of tax havens and more severe sanctions for banks, tax advisers and companies.
Pina Pohl
Vilá Abogados
For more information, please contact:
2nd September 2016
