The European Commission plans to introduce new rules wherein all companies in the region will have to follow the same accounting practices to calculate profits, European Commissioner for Economic and Financial Affairs Pierre Moscovici has said. The move will change the way companies currently report profits and would help in curbing tax avoidance.
As of now, companies in Europe calculate profits according to the rules set by the countries where they are headquartered. Having common European rules will end the various creative cross-border options companies avail to avoid paying taxes.
The law, known as the common consolidated corporate tax base, is currently in the draft phase. It is expected to be published in October or early November.
The plan for a common rule in Europe is not new as it was earlier stalled amid opposition from the UK and Ireland. However, Moscovici said that the move is getting traction amid public outrage over companies paying low taxes.
"We have a strong asset that was not present five years ago – it is the mood in the public and the scandals, which give us some strength. Clearly today the public cannot stand that multinationals do not pay their fair share of taxes, while ordinary citizens did in order to reduce deficits," Moscovici was quoted as saying by the Guardian.
This follows claims from Austrian Chancellor Christian Kern, who said earlier this month that many multinational companies were paying taxes lower than what a local tiny sausage stand paid in the country. He cited companies such as coffee chain Starbucks and online retailer Amazon as examples.
Recently, EU regulators ordered Apple to pay €13bn (£11.15bn) in taxes to Ireland. While this is the largest ever tax penalty handed out by the EU, regulators explained that earlier tax arrangements between Ireland and the US technology firm broke European rules on state aid, as they allowed Apple to pay less tax than rival firms.
Commenting on the Apple issue, Moscovici said the decision was not against American companies or in favour of the Irish government. "We have sent out a signal that the era of large-scale tax avoidance by multinationals in Europe has ended," he said.