The new Commission and what it means for tax justice

Wednesday, November 5, 2014 - 16:04

By Anders Dahlbeck, Policy Advisor, ActionAid UK

As the Juncker Commission has now been approved and set to take office in November, it is important that the promises the Commissioners made during the European Parliament hearings are honoured, and that the new Commission across the various DGs takes an active stance on tackling tax dodging, a problem affecting both EU and developing countries. Tax dodging is costing developing countries billions of Euros each year and depriving poor countries of resources desperately needed to provide basic services such as education and health care.  

During the hearings in the European Parliament, the French Commissioner-designate for Economic and Financial Affairs, Taxation and Customs - Pierre Moscovici - stated that “the need for fairer corporate taxation remains a burning issue and will be on top of my agenda.” He also talked about the proposal for a Common Consolidated Corporate Tax Base – which could contribute towards getting companies to pay tax where their economic activity actually takes place – saying it “should be brought back into the spotlight. Not only does it offer major simplification for businesses and foreign investors, but it could also be a potentially powerful tool against tax avoidance.”

Importantly, Commissioner Moscovici made a commitment on dealing with companies lowering their tax bills by manipulating the value of their intangible assets (such as brand names etc), saying “I intend to hold a frank debate with Member States on these issues.”

Meanwhile, the Croatian Commissioner-designate for International Cooperation and Development Neven Mimica made a vital statement during the European Parliament hearings on moving international discussions on tax rules from the OECD to a more democratic forum by saying that “When it comes to increasing the potential of developing countries to be a real partner and to develop their internal capacity to finance development goals, then I will be very much in favour of enabling at international level, at the UN level, the same approach and the same opportunity for developing countries to be part of these negotiations and talks on how to build common tax evasion mechanisms in the world.”

It is now important that Commissioners Moscovici and Mimica follow through on their promises. While some promising improvement to tax transparency are coming out of the current OECD led negotiations on new international tax rules, developing countries are not party to these negotiations and many of the proposed changes do not solve their most pressing problems when tackling tax dodging.

The new Commission must therefore be a progressive force in ensuring first of all it gets its own house in order when it comes to addressing tax avoidance and evasion, but also in ensuring – along the lines of commissioner Mimica’s suggestions – that developing countries are fully included as equal negotiating partners in future discussions regarding upgrades to the international tax system. Doing so will be key to achieve the EU development policy objectives, but also to avoid inadvertedly encouraging those countries turning themselves into tax havens.

It is also important that the new Commission – and especially the Danish Commissioner-designate for Competition Margrethe Vestager - continues to actively resource and back current EC efforts to look into whether Member States have been giving illegal tax breaks to companies such as Apple, Starbucks and Fiat.

ActionAid hopes that the 5 year tenure of the Juncker Commission will be looked back on as a period with great progress on improving tax transparency and closing the loopholes that allow companies to avoid paying their fair share of tax. Statements made during the EP hearings were promising, but now it’s time for the Commission to put their money where their mouths are.