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Illegal corporate tax deals: EP calls for compensation for countries that suffer

19-01-2016
Euro banknotes
Euro banknotes

If the European Commission decides that an EU member state should recover money from a company due to infringements of tax-related state aid rules, this money should be returned not to the same member state, but to member states that have suffered an erosion of their tax bases or to the EU budget, says the European Parliament in a resolution approved on Tuesday by 500 votes to 137, with 73 abstentions.

The report by Werner Langen (EPP, DE) - which responds to the Commission's annual competition report for 2014 - sets out general recommendations to improve competition and picks some bones with it on corporate taxation practices and state support to banks in the wake of the financial crisis.

"Globalisation and the digital economy require new rules on fair taxation, market dominance, European intervention opportunities and international cooperation. Here, the Commission faces bigger challenges than in the past. The European Parliament wants to be involved actively in these processes", says Mr Langen

Unfair tax competition

The report welcomes the state aid investigations initiated by the Commission in 2014 into favourable “tax ruling” decisions for Starbucks (NL), Fiat (LU), Amazon (LU) and Apple (IE) and the subsequent investigations into all 28 member states' tax ruling practices. It calls on EU member states to cooperate fully with these investigations and with the ongoing work of Parliament's Special Committee on Tax Rulings II. MEPs also press for a review of the current Value Added Tax (VAT) Directive, in order to make it more fraud resistant.

Google

MEPs also home in on the Google case, which should be speeded up, they say. They also call on the Commission to investigate why Google offers its “Android” operating system only in conjunction with other Google services and also why manufacturers are allegedly not permitted to pre-install rival products. Furthermore, MEPs ask the Commission to examine Google's dominant market position in the area of hotel bookings.

New criteria for digital market mergers and acquisitions

MEPs would like the Commission to define new criteria for assessing market size in the digital area. They feel that the current overall “turnover” criterion is not sufficient to judge whether mergers or takeovers are leading to too-dominant market positions in the digital economy. They stress that firms with low turnovers and substantial start-up losses may have large consumer bases and therefore big databases and strong market positions. As an example, they cite the Facebook takeover of “WhatsApp”.

Fine natural persons, not just companies

MEPs consider that the existing rules on fines to be imposed on legal persons for infringements should be supplemented by penalties against the natural persons responsible. Such fines should be high enough to act as a deterrent, they say.

Downscale state support to banking sector

MEPs call on the Commission to clarify the rules and procedures under which state aid in the financial sector can be authorised. They take the view that state aid for the banking sector must be scaled back, at the very latest when banking union is completed.

Procedure: non-legislative resolution

Adopted text will be available here (click on 19.01.2016) Video recording of debate (click on 18.01.2016) EbS+ (18.01.2016)