The European Commission is examining whether it can launch unprecedented legal action that could limit the ability of multinationals to take advantage of business-friendly tax regimes. Eurocrats want to use Article 116 of the EU Treaty to challenge national systems which are said to distort the single market. Such a challenge would be considered highly provocative by the Member States, which fiercely protect their sovereign taxation powers.
Dutch MEP Paul Tang, the new head of the European Parliament’s tax committee, told the FT: “The implementation of Article 116 could put an end to unfair practices in EU tax havens.
“It’s a race to the bottom that benefits some at the expense of others.
“It is unacceptable, especially in difficult economic times. ”
Tax evasion by multinationals has become a big problem in recent months as the bloc ponders how to finance its vast economic reconstruction after the coronavirus pandemic.
The Commission is planning a new European digital service tax for tech giants after the US withdraws from international negotiations next month.
The Eurocrats also presented plans for EU-wide carbon taxes to help repay a planned debt of € 750 billion to finance the recovery of the block coronavirus.
An important judgment rendered Wednesday by the Court of the ECJ will decide whether the Commission was right to order Apple to pay 13 billion euros in tax arrears to the Irish government in 2016.
European officials have suggested that if the decision were to be overturned by the judges, it would have a significant impact on the Commission’s ability to prosecute multinationals.
An official said, “If the Commission loses the Apple file, then it uses our tools to pursue aggressive tax planning. ”
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The measure would also need a stamp of approval from the European Parliament.
“This could be the key to unlocking the deadlock that we have experienced so far,” said a diplomat from the southern EU.
But another source warned that the Commission should not rush plans before guaranteeing that the regime would not be rejected by a minority of blocking governments.