The EU tax system has some big problems that make it ineffective and unfair. One issue is that different countries in the EU have different tax rules and rates. This means that some countries try to attract businesses by offering really low taxes, which leads to a race to the bottom. It might sound good for businesses, but it actually hurts the whole Union because it means less money for things like education, healthcare, and infrastructure. Another problem is that some big companies use tricky methods to avoid paying their fair share of taxes. They find loopholes and move their profits to countries with lower taxes, which means less money for public services that benefit everyone. On top of that, the tax system is complicated and confusing, making it hard for people and businesses to understand and follow the rules. All these issues show that the EU tax system needs major changes to be fairer, simpler, and more effective.
Tax avoidance is eating big holes in our budgets - €190 billion every single year - money we urgently need to finance the just transition to a sustainable and social future. In recent years, the effective tax rates of big digitalised companies have sharply dropped and have now hit an all-time low of 9.5%, while SMEs and the like pay around 23%. The escalating race to the bottom needs to be stopped if we do not want corporate taxes to hit rock bottom at people’s expense.
Thanks to a progressive push, the OECD reached a historic deal on a global minimum tax rate of at least 15%. We will keep up the fight for a global rate of 21% to limit tax competition between countries and generate revenues funding public services for all. We must apply the principle that taxes are paid where profits are made to all multinationals, including digital giants. It's time we made them play a fair game again.
Plastic and kerosene are not taxed as they should be, even though they poison our soil, water and air. Businesses transfer production to countries with lower emission standards and then import the goods. Globally, the richest pollute 17 times more than the poorest, but don’t shoulder their fair share of the costs. Our tax policies lag behind and even undermine our battle against the climate emergency.
Make big polluters like the maritime and aviation sectors contribute their fair share and give ecological transport options the boost they deserve. Hold importers accountable for their emissions through a Carbon Border Adjustment Mechanism. Greener taxation that does not hit the poorest hardest, but helps lift everyone up in a just transition.
In a world of multinationals and global flows of money, countries acting on their own have lost the capacity to impose rules. Yet, when it comes to tax justice, the EU all too often does not even have the right to act. Also, tax rules must be decided by all 27 EU members, allowing individual member states to block tax justice initiatives like the harmonisation of rules or digital taxes, out of short-sighted self-interest.
Empower EU member states to take decisions on tax by qualified majority, so that individual countries can no longer obstruct measures that serve the common good. Like a fraud-proof VAT system or an EU tax havens list. Boost more democratic, transparent and efficient decision-making in tax policies.
LuxLeaks, SwissLeaks and the Panama Papers revealed a broken tax system where big corporations and rich individuals are getting away with exploiting legal loopholes, shopping around for the most favourable jurisdictions and hiding money in offshore tax dumping locations. These dodgy practices are creating vast inequalities in our societies and draining the public purse.
Shine a light on the shady practices of tax abuse. Design innovative solutions to deliver on tax justice. Since 2015, we have been the driving force behind a number of investigative bodies in the European Parliament. We are proud that the new subcommittee on tax started its work in September 2020, both as a watchdog and a people’s forum for tax justice.
- Achieve an EU package on minimum effective taxation and the reallocation of taxing rights to the country where the company makes the profits.
- Reach a progressive environmental taxation package capable of both delivering the Green New Deal and tackling rising socio-economic inequalities.
- Obtain a high-level commitment to push for qualified majority voting on some tax-related issues in the Council.
- End tax competition by achieving a fully-fledged Common Consolidated Tax Base for Corporate Taxation – a single set of rules for cross-border companies to calculate their taxable profits in the EU.
- Demand fairer taxation of big tech companies and new taxation methods that keep up with the increasing digitalisation of the economy.
