Towards Fairer Corporate Taxation: Is Europe getting the policy mix right?
Until the financial crisis hit in 2008, taxation was rarely a matter of international discussion, as it was linked to sovereignty. However, everything changed dramatically with the massive bail-out of banks, and the international agenda gained political momentum and translated into concrete initiatives (e.g. Common Reporting Standards, Foreign Account Tax Compliance Act, Country-by-Country reporting, Base Erosion and Profit Shifting). Despite these efforts, much more remains to be done both at EU and international level.
Dividing lines and divergent views among countries should give their position on a durable, long-term and sustainable solution. On top of that, the digitalisation of the economy raises many issues related to the exacerbation of BEPS (in the context of both direct and indirect taxation), the collection of VAT (where should VAT be levied?) and the allocation of profits (where should profits be taxed?). Furthermore, cooperative and non-cooperative jurisdictions should continue the dialogue with EU, and ensure that tax liabilities reflect and align with the economic substance of a corporation. Having said that, the variation of substance requirements among different countries emphasises the absence of a globally accepted definition. Any effort to develop such standards should take into account the various business types and tax systems that exist.