2016: The Big Tax Year

2015 closed with some good news for the Italian tax authorities: Apple committed to pay EUR 318 million in corporate tax to settle a dispute with the state of Italy over the company’s tax structure channelling profits to its European headquarters in Ireland.

A few days later in 2016, the European Commission was off to a flying start with its decision that the Belgian excess profit scheme was in fact illegal state aid granted to 35 multinationals.

Are national governments and companies starting to feel the effect of the OECD and EU fight against aggressive tax planning? The 2014 LuxLeaks scandal increased the profile of the issue in Brussels; 2015 saw the endorsement of the OECD Base Erosion and Profit Shifting (BEPS) Action Plan and the presentation of the European Commission’s plan for “a fair and efficient corporate tax system in the EU”. It was also the year when the European Parliament decided to have a say on the matter with the establishment of a special Tax Committee.

So what can we expect in 2016? Will this be the year of concrete measures?

First, the EU will be put to the test of the implementation of the OECD BEPS Action Plan. Economic Affairs and Taxation Commissioner Moscovici seems confident that the anti-tax avoidance proposals he will present at the end of January could be quickly adopted by Member States, which have already endorsed them within BEPS. However, the Commission’s ambition to go further than BEPS on certain points, for instance on hybrid mismatches, might be dampened.

Then, the Commission will have to take a decision on mandatory and public country-by-country tax reporting for all multinationals. The French government recently blocked an amendment proposed by the French Parliament, arguing that such a measure would be more efficient at EU level… whereas at EU level, the measure is currently blocked by the Member States. This catch 22 situation might not hold for long. As the European Parliament has now voted four times in favour of this measure and an evaluation of the existing obligation for financial institutions showed little negative impact, it becomes increasingly difficult for the Commission and the Member States not to act on tax transparency.

2016 will also be a critical year for Competition Commissioner Margrethe Vestager. Both the Netherlands and Luxembourg have appealed the state aid decisions that the Commission took against Starbucks and Fiat respectively, and Belgium might do the same. As bigger cases are still pending (Apple, Amazon, McDonalds) and hundreds are said to be in the pipeline, a court ruling against the Commission’s decisions could blow a very cold wind on one of Vestager’s flagship initiatives. Thus depriving the Commission of a course of action which is a significant deterrent against aggressive tax planning.

But the big dossier will be the relaunch of the Common Consolidated Corporate Tax Base (CCCTB). By making consolidation – the possibility to balance out profits and losses between markets – a second step, the Commission was hopeful that this could alleviate the opposition of a number of Member States. So far however, this has not been enough to convince countries such as the UK, which has already expressed its opposition to the Commission’s plan. By delaying the consolidation and making CCTB mandatory rather than optional, the Commission also lost the support of the business community. As a symbol of an ever closer Union, a common tax base risks being another divisive dossier between the pro-EU and the more Eurosceptic Member States further delaying the adoption of ambitious measures.  

Author

Vinciane Patelou

Director

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