The European Parliament and the member states of the European Union are negotiating new European rules requiring multinational companies to disclose the taxes paid in each member state. You call this “country by country reports”.
In the European Union, there has been debate for some time about how much taxes big companies pay. According to many, this is very little. With “country by country reporting,” remittances become more transparent, according to the European Parliament. The Netherlands did not previously support the new European rules, but it has changed its mind, thanks in part to societal pressure, says Europe correspondent Stefan de Vries. Public opinion is becoming increasingly angry, in part because multinational corporations pay much less taxes with all types of construction. This happens in the Netherlands, among other places, which is one of the largest tax havens on earth. It should be noted that this is not about tax evasion, but “tax improvement”, de Vries says. That sounds cool, but it simply means that ordinary citizens pay a lot of taxes and large corporations pay very little. This is how it is generally viewed.
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The change that is now taking place is also happening after pressure from outside the European Union. Renewing these bases has been a spearhead in the Organization for Economic Cooperation and Development, the club of rich countries for years. Calm prevailed while Trump was still president of the United States. But Joe Biden wants things to really change now. The new rules should provide more knowledge of how to set up tax deals. Many tax deals are suspicious. In the Netherlands, for example, the Tax and Customs Department can enter into agreements with all large companies and remain confidential, de Vries said.
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However, the European Parliament and member states still disagree on some points about the new rules. Parliament wants subsidiaries of companies to also disclose their assets and employees in each country. This way you can define letterbox comp. However, critics fear that this could jeopardize the competitive position of companies and countries. “The proponents say this will be the end of tax competition among EU member states.”
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Harmful to businesses
Peter Cavillars, professor of financial economics at Erasmus University, was not positive about the European Union’s plans for new tax rules. It is not beneficial and may also be harmful to companies. The information that the European Union wants to be available to the public must actually be provided by the companies. However, it is only visible to tax authorities at this time. However, the European Union also wants to be clear to the rest of society what companies pay in taxes.
According to Kavelaars, this can be detrimental to a company’s competitive position. You must provide company data and information. “ From a competition standpoint, this is not desirable, ” says Cavillars. The professor also sees other proposals. The European Union and the Organization for Economic Cooperation and Development are working towards achieving a lower tax rate for the entire world. “Once this deal is done, everyone will pay enough taxes,” says Cavillars.
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