The European Commission presented draft laws Thursday designed to crack down on multinational companies that use controversial tax structures to minimize their tax bills.
The law would empower national treasuries to catch profits and assets being shifted abroad for tax purposes. European tax officials would also exchange disclosures from multinationals about their global tax payments.
The European Parliamentary Research Service estimates corporate tax dodging costs the bloc up to €70 billion every year, while the Commission estimates multinationals in Europe pay as much as 30 percent less in taxes than their domestic rivals.
“Companies must pay their fair share of taxes, where their actual economic activity is taking place,” said Valdis Dombrovskis, the Commission vice president in charge of the euro and social dialogue.
The proposed legislation follows a quick succession of tax rulings, settlements and investigations across Europe, involving household names like Apple, Google, McDonald’s and Starbucks. The future law would bring the European Union in line with proposals from the Organization of Economic Cooperation and Development and be a critical step toward harmonizing certain tax policies within the EU.
On Friday, Google agreed to pay a decade of back taxes in the U.K. totaling £130 million and pay higher taxes going forward. In 2013, the company paid £20.5 million (€27 million) in taxes on revenues of $5.6 billion (€5.2 billion) in the U.K., the company’s second-largest market after the U.S.
The Internet search engine is also in tax disputes with France and Italy.
Over the weekend Google said the company has always complied with tax law.
Last month, Apple said it will pay Italy €318 million in back taxes. Italy is also in early stages of a probe into Amazon’s tax strategy, according to a source close to the investigation who requested anonymity because of the sensitivity of the case.
Amazon declined to comment.
Outrage over multinationals’ tax payments has grown since the global financial crisis in 2008, when cash-strapped governments started looking more closely at their tax receipts. Not only did governments point fingers at companies, but also at each other for luring multinationals with generous and sometimes illegal tax deals.
The proposed law would curb multinationals that shift profits generated in high-tax jurisdictions to subsidiaries in low-tax jurisdictions.
Tax collectors in a country where company is headquartered, for example, would be able to go after profits sent to a subsidiary in another country.
Companies that move assets like patents or other intellectual property would have to pay a one-time exit tax. In addition, governments could limit companies from using internal loans to artificially reduce subsidiaries’ profits.
In parallel, the EU would develop a blacklist and sanction tax havens that refuse to abide by international standards.
“We should not be afraid to name and shame,” said Pierre Moscovici, the European Commissioner for economic and monetary affairs, and taxation. He promised further measures to clamp down on tax dodging.
However, others felt the proposal didn’t go far enough.
“It’s clear already that there are also some disappointing elements in the package,” said Anneliese Dodds, a U.K. MEP from the center-left. “The proposal for country-by-country reporting does not include requiring companies to make that information public, something the European Parliament has called for again and again.”
The draft directive will now pass before the 28 EU members, which must adopt it unanimously.
“This is the moment of truth in which we will see the sincerity of the EU member states,” said Burkhard Balz, a German center-right MEP. “States which oppose these rules want to base their economies on taking bread out of the mouths of others.”
In many cases national governments have been complicit, willing to forego tax revenue in exchange for the jobs and synergies these companies bring within their borders.
That’s where the Commission has stepped in.
This month, the Commission ruled Belgium’s international tax system was unfair and ordered the government to claw back €700 million from about 35 companies, most of them European. Last month, the Commission announced a sweeping probe into the taxes of McDonald’s. That followed its demand in October that Luxembourg and The Netherlands collect up to €30 million each in unpaid taxes from Fiat Chrysler Automobiles and Starbucks, respectively.
Now, everyone is waiting for the big shoe to drop: the Commission’s decision about Apple’s tax strategy in Ireland which could cost it as much as €8 billion. Apple’s Chief Executive Tim Cook even made a surprise visit this month to Brussels for a “private meeting” with Competition Commissioner Margrethe Vestager.
A decision is expected early this year.
This article was updated to add the latest developments.
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