The objective of the Anti-Tax Avoidance Package is to enhance the smooth functioning of the Single Market and thereby support the ability of the Single Market to secure sustainable growth, employment and competitiveness. A fair, efficient and growth-friendly corporate taxation is a key element of a strong Single Market. It should be based on the principle that taxes are paid in the country where profits are generated. Today, some multinational companies take advantage of mismatches between national tax systems and exploit loopholes in order to reduce the taxes that they owe. They also exploit the fact that corporate tax rules are no longer well suited to our globalised and digital economy. This means fewer revenues to finance public goods, such as education, infrastructure, etc. or to reduce taxes in other areas. It also affects the level playing field as companies that do pay their fair share of taxes are at a competitive disadvantage. Finally, it threatens the social contract at large. Honest taxpayers (individuals and companies), who shoulder a disproportionate amount of the tax burden, might become less inclined to abide by the rules.
Faced with this issue of tax avoidance, some Member States have intensified their efforts to attract MNEs to their own territories, which may create further incentives for companies to shift profits. Others have taken unilateral action to protect their tax bases. While national rules might seem a valuable short term solution for fixing the most pressing issues, the EU has to ensure that an increase in national anti-abuse measures does not undermine the Single Market. The interaction of 28 national corporate tax systems offers, by their very heterogeneity, opportunities for aggressive tax planners to exploit mismatches and loopholes.
The best option is a coordinated approach at EU level. This is necessary in order to safeguard and strengthen the Single Market, in full respect of the fundamental freedoms. The lack of coordination would fragment the Single Market and affect the overall attractiveness and competitiveness of the EU. Furthermore, the absence of such coordination might discourage some Member States to act against tax avoidance in fear of giving a competitive advantage to other Member States. Diverging rules to address tax avoidance, or the absence of such rules in some countries, would indeed affect the level playing field between companies in the EU and the effectiveness of the fight against tax avoidance. Measures taken to address tax avoidance need to be coherent not only within the EU but also in relation to third countries in order to prevent profits from being shifted outside the EU.
Acting now is timely. Member States have called for an EU approach to address corporate tax avoidance. The EP also expects that the Commission takes the lead in developing an EU approach. More broadly, companies, citizens, NGOs expect the issue of tax avoidance to be better addressed, sooner rather than later, to restore fairness and a level playing field. In addition, Member States are reflecting on whether and how to implement the agreed outcome of the BEPS project in their national legislation. The coordination at EU level therefore needs to be shaped as soon as possible.
