BM 66 – Corporate tax arrangements

07.05.2014
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ESU believes that the response to the European and wider global financial and economic crisis should see a fair and equitable contribution from across society to our recovery, particularly from those with the financial capacity to contribute more. This should involve a deeper tax cooperation among large multinational firms.

The tax loophole, known as the “double Irish” in Ireland, as well as similar arrangements in other countries, enable large multinational firms to shelter profits from corporate tax obligations by having the intellectual property involved legally held by tiny subsidiaries with a tax residence offshore.

This involves paying royalties and licence fees to the offshore companies, funnelling profits through the country where the business is registered to tax havens such as Bermuda, which does not levy corporate taxes.

The OECD’s Base Erosion and Project Shifting (BEPS) project seeks to combat large multinational firms that avoid corporate tax, through a reform of global taxation structures.

BEPS would “neutralise” the opportunities for locating profits in jurisdictions without locating the business activities there, bringing about a closer alignment of business acivities, profits and taxes.

While ESU favours tax competition as opposed to harmonisation, and believes individual member states of the EU should have flexibility and autonomy in setting their headline rates of taxation, global tax avoidance and the erosion of the international tax base cannot be combated in isolation by individual countries.

Effective corporate tax rates paid by these firms should be brought a lot closer to the headline rate, in order to ensure that those with the greatest wealth pay their fair share.

ESU should advocate this position in discussions at an EU Parliament level, and support the moves by the OECD to resolve this situation through the BEPS project.

It is likely that public financing of higher education can only be achieved through a widening of the tax base.

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