The substantial reduction in trade costs and the rapid technological advances characterising the global economy over the past three decades have allowed multinational enterprises (MNEs) to increasingly break up their supply chains and spread them across different countries. The principal implication of this change relates to the concept of value added and the way it is created and captured across MNE-controlled global value chains (GVCs). The dynamic nature of transfers within MNEs, the increasing role of services and intangible assets in manufacturing, and most critically the unfolding digital revolution have all intensified the mobility of value-generating factors within GVCs, and highlighted the difficulty of defining the exact location where value is generated. These developments have significant policy implications. One critical area is that of tax policy, where the challenges posed by the new economic landscape are numerous and multifaceted. On the one hand, governments seek to encourage trade and investment by MNEs by removing tax and regulatory barriers they face. Some governments go even further by resorting to harmful tax competition that drives corporate income taxes to the bottom. At the same time, many MNEs continue to employ enhanced tax arbitrage to minimise their tax obligations across jurisdictions; furthermore, business models are increasingly becoming borderless and highly mobile, and therefore difficult to tax. In view of these challenges, consensus is gradually emerging that tax systems need improved alignment to ensure that profits are taxed where the economic activities generating them are performed and where value is created. Yet, allocating jurisdiction to tax business profits in the context of MNE-controlled GVCs remains a highly complex process.
“A new research commissioned by the Greens/EFA Group in the European Parliament shows that many companies do not pay much tax in many EU countries – in absolute values or in comparison to nominal rates or to some other countries.”
ECIPE organises a discussion about tax competitiveness, economic performance and government accountability in the EU, addressing the following questions: Why do many EU countries rank so low in international tax competitiveness? Given its exceptional performance, should Estonia be seen as a role model for other countries? What should we really talk about: tax rates or tax code? Who’s standing in the way of meaningful tax reforms inside EU Member States? Would a Common Consolidated Corporate Tax Base (CCCTB) actually improve tax competitiveness in the EU? And what would be the impact of a Digital Services Tax (DST) on EU ambitions to harmonise and simplify Member States’ tax code?
A summary of the Committee’s consideration of amendments is now available.
In light of recent revelations about the scope of CumEx tax fraud in Europe, and in view of an upcoming coordination meeting tomorrow between the finance ministers of France and Germany, S&D Group president Udo Bullmann calls on EU member states to make swift progress on EU taxation files in view of next year’s election.