World Economy

No Tax Dodging, Pay Up

International tax loopholes have become a thing of the past
Jeroen Dijsselbloem said the commission is right in investigating possible illegal state aid.Jeroen Dijsselbloem said the commission is right in investigating possible illegal state aid.

Multinationals should refrain from tax avoidance practices and pay their fair share of taxes, the head of eurozone finance ministers said on Saturday, in a new endorsement to the European Union fight against tax dodging.

In the wake of the ‘Panama Papers’ revelations of widespread tax avoidance practices, Brussels has toughened up its drive for tax fairness by tightening controls and adopting stricter rules. The recent shock multi-billion euro tax demand on Apple was part of that trend, Business Insider reported.

“My message to those companies is you are fighting the wrong battle. You have to move on. Times are changing,” the head of the euro group and Dutch Finance Minister Jeroen Dijsselbloem told reporters on his arrival to a meeting of EU finance ministers in Bratislava, Slovakia, which will discuss tax policies.

“You need to pay your taxes in a fair way. Part of that would be in the US, part of that would be in Europe. So get ready to do that,” Dijsselbloem added.

“International tax loopholes are a thing of the past,” he added.

The commission, which is in charge of protecting market competition in Europe, is investigating multinationals’ tax arrangements in several EU countries to assess whether, by lowering corporations’ tax bills, illegal state aid may have been given.

Online retailer Inc and hamburger group McDonald’s Corp face European Commission’s probes over taxes in Luxembourg, while coffee chain StarbucksCorp has been ordered to pay up to €30 million ($33 million) in back-taxes to the Dutch state.

The Netherlands has appealed against the commission’s decision on Starbucks, and Ireland did the same in the Apple case, fearing that this may undermine the country’s long-established policy of attracting multinationals with low taxes.

  Right to Investigate

Dijsselbloem said the commission was right in investigating possible illegal state aid, but added that he thinks the Netherlands has the right to ask the EU court whether rules are applied correctly by the European Commission.

Luxembourg Finance Minister Pierre Gramegna also showed scepticism against the commission’s ruling.

“We are talking about the past, things that happened 5 or 10 years ago, and there are different opinions about the interpretation of the rules,” he told reporters ahead of the meeting.

Tax issues will be the main topic at the finance ministers’ meeting in Bratislava where national delegates will discuss a paper presented by the Slovak presidency of the EU calling for more tax certainty for multinationals.

The proposal aims at stepping up cooperation among EU states to reduce tax avoidance, while making tax bills more predictable for corporations.

The commission will also brief ministers on plans to set up a common corporate tax base and a single European blacklist for tax havens, in a further effort to counter tax avoidance and make companies pay taxes where they generate profits.

“It is very clear that we can only do this by working together within Europe and beyond Europe to make sure that international corporations pay the right amount of tax in the right place,” British Finance Minister Philip Hammond said arriving to the meeting. Ministers and senior EU officials in the Slovak capital also are urging the Greek government to speed up enactment of economic reforms so it can get its hands on the next batch of bailout cash before the end of October.

Greece, which depends on the money due from the bailout to stay afloat, has recently fallen short of reform commitments, stoking concerns of a flare-up in the country’s debt crisis. Because it hasn’t delivered on the reform promises it has made, it can’t yet get hold of the €2.8 billion ($3.2 billion) due from this current phase of its bailout program.