EU targets corporate tax avoidance as anger over Google spreads
BRUSSELS, Belgium – The European Union launched plans Thursday, January 28, to stamp out tax avoidance by multi-national corporations just as anger spread across Europe over the super low taxes paid by Google.
Economics Affairs Commissioner Pierre Moscovici announced a raft of measures to combat tax avoidance, in addition to EU investigations under way into the tax deals of major groups such as Apple, Starbucks and McDonald's.
The news came as the British government unleashed a storm of criticism for accepting too little tax from Google, and as Italy demanded hundreds of millions in euros in back taxes from US-based Internet giant.
"The days are numbered for companies that aggressively reduce their tax bills," Moscovici told a news conference in Brussels. "We are today bringing a clear and concrete response to tax evasion."
The measures from the European Commission call for big companies to be obliged to report profit country by country – a break with the previous practice that allowed multinationals to secretly shift revenue across borders to save on tax.
Another requirement will compel nations to agree on minimum standards for drawing up tax rules, so that multinationals stop the practice of shopping around for loopholes to avoid paying tax altogether.
The EU plans are timely as Google announced Friday it was to pay £130 million ($185 million, 170 million euros) in British back taxes following a probe into its tax arrangements.
Italy is demanding Google pay over 200 million euros ($219 million) in back taxes following an inquiry by the financial police.
French officials are also believed to be pushing for a Google payout of as much as 500 million euros after an investigation that included raids by police.
"Google complies with the tax laws in every country where we operate. We continue to work with the relevant authorities," a spokesperson for the company in Milan said.
Both Google and Apple have complained they are being unfairly targeted by European authorities discriminating against multinationals.
The European branches for both Apple and Google are headquartered in Ireland, a country with one of the lowest levels of corporation tax in the EU.
"The ridiculous outcome of Google's tax treatment in the United Kingdom is the best illustration of the need for a unified tax regime for multinationals in Europe," said Alain Lamassoure, an influential MEP on tax issues from the right-of-center EPP party.
The tax deals linking Apple with Ireland are currently under investigation by the EU.
On Thursday the bloc's competition commissioner Margrethe Vestager warned Google could be added to the list.
"If we find there is something to be concerned about, if someone writes to us and says this is maybe not as it should be, then we will take a look", Commissioner Margrethe Vestager told BBC radio.
Within hours, the opposition Scottish National Party's spokesman Stewart Hosie said they had sent a letter to Brussels calling for a probe.
Google, like most multinationals where operations span continents, does not reveal revenues for individual countries.
The two EU proposals are part of a 15-point OECD package agreed by leaders at a G20 summit in Antalya, Turkey, in November.
Seven EU states – including low tax Cyprus and Malta – are not part of the OECD and the pressure will be huge for them to agree to the proposal.
Activists and MEPs mostly welcomed the measures though several critics complained that any information gathered by tax authorities would remain secret.
"A crucial first step to making a real difference would be for multinationals to publicly report where they make their profits and where they pay their taxes," said Tove Ryding, a specialist on tax evasion at NGO Eurodad in Brussels.
"Instead, the European Commission is presenting a package on how to introduce secret reporting that keeps parliamentarians, journalists and the general public in the dark," she said.
The OECD calculates that national governments lose $100-240 billion, or 4% to 10% of global tax revenues, every year because of the tax-minimizing schemes of multinationals. – Alex Pigman, AFP/Rappler.com