Brussels (EFE) put a stop to the new global minimum rate of 15% for large companies.
Ferrovial’s decision to move its headquarters from Spain to the Netherlands has highlighted the difference in tax treatment that multinationals receive from one country to another, something that, although it does not appear among the reasons given by the construction company Spanish to move, is an essential factor for companies when choosing where to establish their business.
Up to 20 points difference
The Twenty-seven are free to set their tax policy and, although the nominal rate of corporate tax is 21.4% on average in the EU, the effective rates paid by companies range from 9% in Bulgaria to 29%. of Spain passing through 14.1% of Ireland and 21.5% of the Netherlands, according to data from the European Commission for 2021.
In the case of multinationals, the effective rate is even below 5% in countries such as Luxembourg, the Netherlands and Cyprus, according to a study by the Justice Tax Network organization.
Schemes such as tax incentives for the assignment of patents, tax exemptions for intellectual property or superdeductions for R&D contribute to reducing the tax bill, practices considered very harmful by organizations such as Oxfam, which has denounced that these allow, for example, that pharmaceutical companies pay only between 5 and 6% of tax in Belgium.
Also the “tax rulings”, custom tax agreements that allowed giants like Amazon and Fiat in Luxembourg or Starbucks in the Netherlands to pay taxes for a small fraction of their profits, as the investigations of the European Commission showed.
Multinationals take advantage of the loopholes
If some countries have used their tax systems to attract companies, the large multinationals have also known how to take advantage of the gaps in the mosaic of national legislations to exploit the tax advantages of the different jurisdictions, transferring benefits from one to another with complex structures.
The result is that some States of the European Union end up losing part of the collection that would correspond to them for the benefits generated in their territory to the detriment of countries that are more fiscally attractive thanks to legal practices, but questionable in a single market.
Luxembourg and the Netherlands are the ones that subtract the most income from the rest of the community partners, who lost 12,000 million euros and 10,000 million a year, respectively, only due to the transfer of profits from US multinationals to these two countries, according to calculations by Justice Tax Network, which includes them among the ten main tax havens in the world.
The most affected are France, Germany, Italy and Spain, which collected between 2,000 and 7,000 million less annually.
“For years the Netherlands has caused a race to the bottom within the EU,” said the organization’s executive director, Alex Cobham, criticizing the “serious cost” of this “tax competition.”
Spain, specifically, lost 2,711 million dollars, 11% of the collection by companies, in favor of “tax havens in the EU”, especially the Netherlands (1,089 million), Luxembourg (811 million), and Ireland (604 million), according to a 2021 study by the Universities of Berkeley, California, and Copenhagen.
The European Commission asks to stop these practices
The European Commission maintains that there are no tax havens in the EU, but in 2018 it recognized that seven members – the Netherlands, Luxembourg, Ireland, Belgium, Cyprus, Malta and Hungary – carried out “aggressive tax planning” and since then it has asked them repeatedly tackling these practices, most recently when negotiating their post-COVID recovery plans.
Pressured by the financial crisis and scandals such as LuxLeaks or the Panama Papers, Brussels tried in the past decade to approve a common base for corporate tax in the EU that would guarantee payment where the profits are generated, but the legislation never came out. forward since a single country can veto any tax proposal, which blocks any attempt at harmonization.
The Commission then decided to focus on initiatives to combat tax evasion, with several anti-laundering directives, and on strengthening transparency and cooperation between countries, with measures such as country reports on the taxes paid by large companies.
However, the biggest step forward to end the tax gap for multinationals could come from the agreement sealed by more than 140 countries in the OECD to set a minimum effective rate of 15% globally for companies with a turnover of more than 750 million euros per year.
The pact, promoted by France, Spain and Germany, seeks to end incentives to transfer profits to tax havens and was signed by all EU partners, including Ireland, Hungary and Estonia, which had initially shown reluctance.
The measure will be applied in the Twenty-seven with a directive that, after months of negotiations to convince the countries most jealous of their tax autonomy and circumvent the last-minute vetoes of Hungary and Poland, was approved in December and will enter into force in 2025.
This would make it possible to raise 50,000 million more in the EU, 700 million in Spain, according to the EU Tax Observatory.
The entry The gap in corporate tax in the EU opens the door to unfair competition was first published in EFE Noticias.