Large corporations like Google or Starbucks sometimes hardly pay any taxes on their profits. Didn’t you know? Hardly surprising. All the better that this is now changing.
What comes from Brussels often appears complicated, boring, dry. One of the most recent EU resolutions also works like this at first, but wrongly:
The Council of Ministers of the European Union, in which the national governments vote, and the EU Parliament have each other agreed on a major change in tax rules for large corporations. In future, companies that earn their money in different EU countries should indicate which country they are paying how much taxes to.
Snore, yawn, and what’s that to do with me, do you think? Understandable. As I said, at first glance, EU policies initially have no direct impact on the lives of its citizens.
More transparency, fuller state coffers
In the case of the so-called “country-by-country” rule, however, it is worth looking twice. Because: The new tax regulation ensures more transparency, fairness – and potentially even ensures that the countries in the EU, especially Germany, i.e. all of us, have more money at their disposal, which in turn can be used to repair bridges, school toilets or construction investing in playgrounds.
But one after the other.
So far, companies that do business in different countries have been able to choose where to tax their profits. For an international coffee chain such as Starbucks, for example, it is easy to move profits that they have made in Germany to countries where taxes are lower than in Germany, for example to the Netherlands, via in-house accounting.
The little ones pay a lot, the big ones little
The result: While the small, owner-run coffee house on one side of the street pays tens of thousands of euros in corporation tax on its profits to the tax authorities every year, Starbucks only reports a mini profit to the tax office on the other side of the street. In this way, the large chain pays comparatively less taxes despite significantly higher sales – without the public noticing much of it.
While this is legal, it is still far from legitimate. Because with the taxpayers’ money from the small coffee house, the state finances infrastructure that is also used by large corporations. For example, institutions such as public universities that train managers who later work for corporations like Starbucks and generate further profits there.
The new regulation of the EU is preparing to solve this injustice at least in part, or better said: to make it visible for the time being.
Small EU states are blocking comprehensive reform
The European Union is still far from the point where all of its member states levy the same taxes on multinationals. In particular, smaller countries such as Luxembourg, Ireland or Holland continue to block such a so-called “Common Consolidated Corporate Taxe Base” (CCCTB), because as tax havens they like to attract large corporations with low taxes.
However, a first step in the right direction has been taken. In the future, Amazon, Google and Co. can at least no longer fly below the radar, no longer earn more or less tax-free money without at least being booed for it.
In the future we will know which company is making its fair contribution
The new rule creates transparency. And it ensures that we citizens and consumers can at least more easily judge where we are leaving our money and our data. With companies that make their fair contribution to the local common good or not.
At best, what follows from this: The undercutting competition for corporate taxes in Europe is coming to an end.
Ideally, the EU will go even further in the next step and introduce a minimum tax for large companies, which is now even being discussed globally regardless of the new rule. That would ultimately ensure that not a few small countries can reduce the revenues of the large ones so that there is too little money for the financing of the state and its necessary offers.