TAE on the reform of international corporate taxation

Reforms, yes! Ideology and populism, no!

The US government’s current efforts to introduce global minimum corporate tax rates have given new impetus to negotiations at OECD level. The international community has been trying for years to modernise international corporate taxation and adapt it to the digital age. Now that the US has come out in favour of a global minimum tax, an international consensus appears possible as early as mid-2021. 

With this statement, the European Taxpayers’ Association (TAE) does not intend to assess the US’s motives behind this change of course, but rather to contribute to making the discussion more objective.

A reform of corporate taxation could present a genuine opportunity to make the competitive playing field fairer in the tax sphere. This is because, unlike small and medium-sized enterprises, multinational corporations have the ability to shift profits to low-tax countries. For this reason, the general public and large sections of the business community support a coordinated approach to tackling international tax avoidance.  

The European Taxpayers’ Association (TAE) is, in principle, open to tax reforms. However, it also sets out specific demands for an appropriate and workable reform of international corporate taxation. It is undisputed that the appropriate taxation of digital companies should also form part of the international reform package. However, it is by no means constructive to stigmatise large international US corporations such as Google, Apple, Facebook and Amazon (GAFA) or Chinese corporations such as Alibaba, even though this has often been the practice on the part of politicians to date. We must avoid isolated international or European initiatives such as the planned introduction of an EU digital services tax.

The European Taxpayers’ Association categorically rejects new corporate taxes such as the digital services tax (DST), as these are levied not on profits but on revenue generated! Such a reform fails to take account of a company’s economic situation and would therefore constitute a flagrant breach of the net principle!  

Tax competition must not be abolished under any circumstances, as taxes are and will remain an important factor in attracting business. It is simply a matter of ensuring that tax competition is equal and fair for all, and that no special agreements or exemptions for individual companies – which benefit them exclusively – are concluded ‘behind closed doors’, as has been the case in the past. The core of tax reform must therefore be to ensure that companies fulfil their tax obligations, taking into account criteria such as location, the seat of management, value added, production facilities, the place where turnover is generated and, in particular, the profit made. The country in which the tax is ultimately paid is irrelevant for the sake of tax fairness!  

Download the TAE working paper on the reform of international corporate taxation