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Tax grilling for multinationals

Posted by Nick Prag at 17 March 2016, 22:35 CET |
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The issue of tax avoidance and tax havens has caused much public concern for a while now, but actually dealing with it is taking some time. There was some drama this week, however, when representatives of the big bad multinationals finally appeared before the special European Parliament committee on tax rulings.

Tax authorities from the likes of Monaco, Jersey, Guernsey and Andorra had already explained their practices and shared views on the Commission's Anti-Tax Avoidance Package, as well as on an action plan by the OECD to prevent companies from artificially shifting profits to low or no-tax locations where there is little or no economic activity.

The main event though was the appearance before MEPs of the men from Apple, Google, IKEA and McDonald's (Fiat Chrysler and Starbucks sadly declined the invitation).

The committee was set up in the wake of the Luxleaks revelations, with a mandate especially to examine 'harmful tax practices' aimed at 'attracting non-resident firms or transactions at the expense of other tax jurisdictions and/or measures aimed at privileging only some companies, thus distorting competition' – including tax rulings, which appear to be the tip of the iceberg.

MEPs heard the multinationals' views on the proposed directive against base erosion and profit shifting (anti-BEPS), following an agreement struck at OECD and G20 levels. They specifically asked about the proposed requirement for country-by-country reporting of profits, taxes and subsidies and whether such information should be made public.

And company specific tax structures - such as Google's 'Bermuda' structure, IKEA's 'royalties', Apple's tax arrangements in Ireland and McDonalds' franchises - were subject to intense debate.

Nevertheless Google said it paid a global effective tax rate of 19% and that the EU's overall rate is around 20%; Apple said it is the largest taxpayer in the world, but was not prepared to disclose its EU and Irish tax figures; and McDonalds said it is not in favour of public reporting by country.

But they know they are fighting a losing battle. Ever-increasing public and political attention to their aggressive corporate tax planning practises has increased pressure for major changes. And this means making the multinationals pay tax where they earn profits.

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Nick Prag

Nick Prag

Nick Prag is founder and managing editor of EUbusiness.com. Prior to EUbusiness, he was senior editor at Europe Online SA in Luxembourg, where he played a major part in the launch of Europe Online International.