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E.U. to Share Data on Multinational Companies’ Tax Deals E.U. to Share Data on Multinational Companies’ Tax Deals
(about 5 hours later)
BRUSSELS — The European Union agreed on Tuesday to oblige member states to exchange information about the deals they grant to multinational corporations to help them lower their tax bills. BRUSSELS — European Union finance ministers agreed on Tuesday to force member states to share information about preferential tax deals granted to multinational corporations.
The agreement, reached by the bloc’s finance ministers, is intended to address anger over the ways some national governments have granted generous tax breaks to certain companies even as ordinary citizens have been squeezed by years of austerity. Such tax deals, which have angered ordinary citizens squeezed by years of austerity, cause friction among member states competing with one another for jobs and investment. The deals also raise concerns that they may violate European Union rules, and that companies use them to unfairly avoid taxes.
But some lawmakers immediately criticized the agreement as falling short of what would be required to remedy the problem. But some European lawmakers criticized the agreement as riddled with exemptions, falling short of what would be required to remedy the problem.
The European Union and its patchwork of tax systems have provided rich rewards for multinational corporations that have prospered from the agreements offered by smaller member states like the Netherlands, which has such a deal with Starbucks, and Luxembourg, which has a deal with Amazon. Elisa Ferreira, a Portuguese member of the European Parliament and a spokeswoman on economic and monetary affairs for the Socialists and Democrats group, blasted ministers for having “watered down” a proposal that “was already the absolute minimum in terms of transparency.”
Pressure to address the problem also came from large member states like France and Germany, which complained that they were losing revenue as smaller countries use tax incentives to attract jobs and investment. Ms. Ferreira said the law did not grant the executive arm of the European Union, the European Commission, sufficient access to information that would allow it to detect unfair tax arrangements.
The idea behind the proposed law is to deter national tax authorities from offering selective treatment to companies in the future, Pierre Moscovici, the European commissioner for financial affairs and a former French minister of finance, told a news conference on Tuesday. Multinational corporations have prospered from agreements offered by smaller member states like the Netherlands, which has such a deal with Starbucks, and Luxembourg, which has one with Amazon.
Pressure to address the problem also came from large member states like France and Germany, which complained that they were losing revenue as smaller countries used tax incentives to attract investment and commerce.
Tax is an area of policy where member states of the European Union, with its patchwork of tax systems, zealously guard their sovereignty. As a result, agreements on tax at the level of the European Union require unanimity among ministers, while the European Parliament plays only a consultative role before such agreements become law. Tuesday’s agreement is expected to go into effect on Jan. 1, 2017.
The law is intended to deter national tax authorities from offering selective treatment to companies, Pierre Moscovici, the European commissioner for financial affairs and a former French minister of finance, said at a news conference on Tuesday.
Mr. Moscovici said he had called for “a revolution” in tax transparency and said that “we won a first victory in this revolution.” The law should mean an “end to obscure tax agreements between companies and authorities which can facilitate tax abuse,” he said.
Mr. Moscovici, a former French finance minister, said the European initiative complemented a proposal made a day earlier by the Organization for Economic Cooperation and Development, which advises industrial nations on economic policy.
The law agreed to Tuesday also complements an investigation by Margrethe Vestager, the European competition commissioner, into the tax arrangements used in Luxembourg by Amazon and a unit of Fiat, in Ireland by Apple and in the Netherlands by Starbucks. That investigation focuses on whether these states, and others, have offered tax deals to companies that are not available to their competitors.
Ms. Vestager could decide such deals amount to a form of state aid that is illegal under European Union regulations.
When Mr. Moscovici recommended his proposals in March, he sought a law that would have shined a light on deals going back a decade. Instead, the law would apply only to deals that were issued or renewed during 2012 and 2013, were still in force at the start of 2014, or were struck after 2014.
The ministers also exempted tax deals reached or renewed before April 2016 that benefit small and medium-size companies — those with annual net revenue of less than 40 million euros, or $45 million.
Small companies concerned mainly with financial or investment activities would not benefit from that exemption, however. The Netherlands was particularly eager to exempt smaller companies from the rules.
The law would oblige member states to send information about special corporate tax arrangements twice a year to other national tax authorities across a secure email system, and, in the future, to a central database. The European Commission would be able to take to court those states that refused requests from other states for more information about a particular tax agreement.
The ministers were meeting in Luxembourg, a country that has become symbolic of the issue. Its tax arrangements have drawn investment that helped Luxembourg grow richer in recent decades. Those tax deals have also become a politically awkward matter for Mr. Moscovici’s boss, Jean-Claude Juncker, who is the president of the European Commission and was prime minister of Luxembourg for nearly two decades.
Luxembourg became the focus of scrutiny in November 2014, when the International Consortium of Investigative Journalists published a report accusing more than 300 companies, including the Pepsi Bottling Group, Ikea and FedEx, of benefiting from preferential tax deals extended by the small country.
Asked whether the shorter period of retroactivity would help shield countries like Luxembourg from scrutiny, Pierre Gramegna, the country’s finance minister, said going back a decade would have involved “huge administrative work” for many member states.
Mr. Gramegna, speaking at the same news conference as Mr. Moscovici, also suggested the new law would not have an impact on Luxembourg.
“By having automatic exchange of information, you are not taking away any tax from anybody,” said Mr. Gramegna. Such a measure is “normally not impacting the budget of Luxembourg and I suppose it’s not going to impact the budget of other countries.”