Fight against tax avoidance: Experts warn of consequences for the EU economy!

Fight against tax avoidance: Experts warn of consequences for the EU economy!

Prof. Dr. Reinald Koch recently presented his research results on corporate taxation of European corporations to the tax committee of the Federation of German Industries (BDI). The aim of the lecture was to give an overall assessment of the effects of European tax policy in recent years. A central focus was on combating tax avoidance by multinational companies. Koch said that the current tax policy makes only limited empirical sense and needs to be revised.

In his remarks, Koch emphasized that there was no evidence that European corporations could significantly reduce their effective tax rate by shifting profits to low-tax countries. This particularly applies to companies from large economies such as Germany, France, Italy and Great Britain. At the same time, the existing measures against profit shifting lead to a high level of complexity in European tax regulations, which in turn increases the tax risk and reduces stock market capitalization. Koch also warned that the regulations to combat tax avoidance could have negative real economic consequences. For example, the introduction of the interest rate cap in the EU led to a decline in investments, growth and risk-taking among companies. These research results from Koch provide important impulses for the discussion on corporate taxation in the European Union ku.de reported.

Challenges of tax policy

Tax policy and the fight against tax fraud have been a hotly debated topic in the European Union for over a decade. Journalistic exposure of tax loopholes through various revelations, including the Luxembourg Leaks, Panama Papers and Paradise Papers, have helped highlight rising discontent over harmful tax practices, particularly in the wake of the economic crisis. Unpaid taxes lead to reduced budget resources at national and EU level in the long term. Tax policy is also closely linked to the sovereignty of the member states, such as europarl.europa.eu determines.

The fight against tax fraud is being fought jointly by both the Member States and the European Union. Taxation is one of the priorities of the European Parliament. A permanent subcommittee on tax issues (FISC) has existed in Parliament since September 2020. This supports the Committee on Economic Affairs and Monetary Affairs (ECON) and deals with issues such as tax fraud, tax evasion and financial transparency.

Regulations and information

As part of the legislative action, a number of temporary special committees were established during the 2014 to 2019 legislative session to identify deficiencies in tax regulations. Important recent legislative proposals focus on information sharing. For example, the Directive on administrative cooperation in the field of taxation (DAC) provides for the exchange of tax notices between Member States. The aim of this exchange is to disclose corporate tax planning strategies and provide country-specific information from large multinational companies. In addition, this exchange is intended to prevent aggressive tax planning practices that are prohibited to domestic companies, as on cap-lmu.de is presented.