Multinationals must pay tax where they earn profit - Moscovici

Commissioner wants multinationals tax data to be public and he hopes for deal on corporate tax by end of June

European Union Economics Commissioner Pierre Moscovici told French radio RTL that the EU had to put a stop to the way companies pay little or no tax in the countries in which they operate, by using subsidiaries in other countries set up specifically for tax reasons.(Photograph: David Sleator/The Irish Times)

Multinational companies must pay taxes where they earn profits and stop using aggressive tax optimisation schemes, the European Union's Economics Commissioner Pierre Moscovici said on Monday.

Moscovi told French radio RTL that the EU had to put a stop to the way companies pay little or no tax in the countries in which they operate, by using subsidiaries in other countries set up specifically for tax reasons. “It is vital that multinational companies pay their taxes where they generate profits,” Moscovici said, adding that a draft directive on the taxation of multinationals was now with the EU’s Council of Ministers.

The European Parliament estimates that tax avoidance by multinationals costs European Union countries some €70 billion per year in lost revenues. The current Dutch presidency of the EU has put tax issues at the top of its economic agenda. EU officials have said this tax avoidance legally exploits loopholes in tax legislation that they now want to close.

Moscovici said the draft directive proposes an entry tax as well as an exit tax on corporate earnings being moved to low-tax countries, so that taxation levels are similar to the country in which the profit was earned. “I want us to agree the entire fiscal package that is now with the Council of Ministers and I hope agreement can be found in the first half, under the Dutch presidency,” Moscovici said.

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Moscovi said Europe needs fiscal reporting country by country, so that authorities have access to tax and accounting data of multinational companies in all of the EU countries in which they operate. He added citizens and the media should also have access to these data. “I am favour of total transparency for these accounting and fiscal data,” he said.

Last month, EU finance ministers backed new rules under which their countries would exchange information on the tax affairs of multinationals, obliging these firms to disclose data on revenues, profits and taxes to the administrations of all EU countries where they operate. That data would then be exchanged between the 28 EU states. The rules are expected to be formally adopted by June and will require the unanimous approval of all 28 EU states.

Reuters