MEPs back common corporate tax proposal with big majority

MEPs across various parties have pushed through a report backing the European Commission’s proposal for a common corporate tax

Members of the European Parliament have voted overwhelmingly in favour of two reports endorsing a proposal by the European Commission for a common corporate tax.

The two reports, proposed by EPP member Alain Lamassoure and S&D member Paul Tang, propose respectively a common corporate tax base (CCTB) and a common consolidated corporate tax base (CCCTB).

Together they form a single set of rules for corporate tax: the first a common corporate tax, the second allowing multinationals to offset losses in one member states against profits in another to reach a taxable net profit.

Maltese MEPs voted against the reports and the country is expected to veto any common tax proposal in the Council, but creating alliances with other member states may get more difficult when electorates become more sensitised to tax avoidance.

The Lamassoure report was approved by 438 votes in favour to 145 against, with 69 abstentions, while the Tang report was approved by 451 to 141 votes, with 59 abstentions.

The revamped law proposes a common tax mandatory for all companies with an annual turnover of over €750 million, and within seven years, for all European companies.

Malta’s imputation tax system allows multinationals operating outside the island to book their profits into a Malta “tax resident” company, and qualify for an 85% refund on tax paid here.

“We voted against these proposals for a directive because they are the first step in harmonising tax across the EU. Tax policy is a sovereign matter between EU member states and this is how it should stay,” Labour MEPs Alfred Sant, Miriam Dalli and Marlene Mizzi said.

“Tax harmonisation harms smaller member states, especially those on the EU border which need flexibility to remain competitive and make up for their economic shortcomings.”

The MEPs said the common tax would not reduce tax avoidance, and that it would put EU companies at a disadvantage to non-EU multinationals. “We are in favour of full transparency where tax competitiveness is flexible and just but it is not in Malta’s national interest to support the CCTB.”

The three Maltese members of the EPP, MEPs David Casa, Roberta Metsola, and Francis Zammit Dimech, also voted against and expressed their strong reservations on European Parliament Reports that called for an introduction of a CCCTB & CCTB. 

The MEP said the fight against tax fraud did not imply a common corporate tax. “The EU is not a homogenous area and not all regions in the EU face the same economic realities, be it for their domestic market size, geographical realities or resources. 

“Questions of tax of this nature must remain an issue of national competence since they reflect the different economies of Member States. We are convinced that a one-size-fits all approach is not the right way forward for Europe as inevitably it would be the EU's smaller economies, such as Malta, that would bear the disproportionate brunt of such policies. Introducing a CCCTB, CCTB or Financial Transaction Tax would damage Malta’s economy and we will always protect Malta’s interests.”

French MEP Alain Lamassoure (EPP) said the vote was a giant leap in the field of corporate taxation: “Not only would this legislation create a model that is more suitable to today’s economies through the taxing of the digital economy, but it would also halt unfettered competition between corporate tax systems within the single market, by targeting profits where they are made.”

Dutch MEP Paul Tang (S&D) said the corporate tax system was outdated and left citizens and small companies worse off. “International action is needed to turn the tide. The EU is our best chance to make our tax system more just and more modern.”

Malta was singled out last week by the European Commission as being one of several member states promoting aggressive tax planning structures. “Commissioner Pierre Moscovici has been a consistent advocate of regulating tax competitiveness in line with the traditional French stand,” Sant told MaltaToday.

“What has been damaging our position is that while the actual tax arrangements we propose – and which had been validated by the Commission in the past – have increasingly come under critical attack, the impression has been heightened that anyway, the implementation of the same arrangements is not sufficiently transparent, nor subject to sufficient diligence and enforcement.”

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