European Commission proposals for rules on shell companies and minimum taxation of multinationals: A further step in the right direction

In a proposal for a directive to help prevent the misuse of shell entities for tax purposes, the European Commission aims to ensure that letterbox companies -fake firms that have no or minimal economic activity- in the EU are unable to benefit from any tax advantages and do not place any financial burden on taxpayers. To become effective and legally binding, this proposal has to be adopted by the Member States acting in the Council.

A further proposal for a global minimum level of taxation for multinational groups in the EU aims to deliver on the EU’s pledge to be among actors to implement the OECD/G20’s recent global corporate tax reform agreement to bring a 15% effective tax rate for very large international companies. As foreseen by the OECD/G20, the tax rate would apply in at least 136 countries around the globe and represent more than 90% of the world’s GDP. This proposal, too, needs to be adopted by the Council.

CESI Sectetary General Klaus Heeger said: “We have been calling for an effective fight against tax avoidance by multinational companies for long. Taxes on labour are high, public debts increase in many countries, and governments in many places lack resources to finance quality public services for citzens – while big business can shift profits to tax havens and sneak away from taxation. One can always argue that 15% of minimum corporate taxation for very large multinationals is not sufficient, that the G20/OECD agreement contains too many loopholes, or that action by policy makers on taxation is too slow. However we should be aware that a deal that involves not only the EU Member States but all further relevant global actors as well, including many tax havens, is a complex challenge. In this sense we welcome and support the G20/OECD agreement as well as the European Commission’s plans to implement it and set additional rules to fight shell companies. The Member State governments acting in the Council must now quickly adopt the Euroepan Commission’s proposals and send a strong sign to global politics to follow suit. This should be considered a further important step towards fair taxation. There is still a long road ahead.”