Column Tax Policy

How the EU can avoid fal­ling behind in glo­bal tax com­pe­ti­tion

Corona, the transition to a green and digital economy, staying competitive: a modern tax system with secure revenue streams for member states is the key to negotiating these challenges. An intelligent alignment of national taxation policies is vital if the EU is to remain globally competitive as a business location.

The current European Commission action plan for business taxation contains 25 initiatives to be implemented by 2024. Taxation issues belong right at the top of the EU agenda, and not just to combat tax evasion and fraud. More important still is maintaining the efficiency of the European business sector, which is indispensable to revitalising our continent. It would therefore be beneficial to see fewer tax hurdles for companies in the EU single market.

The European Parliament has established a permanent subcommittee for tax matters – and I applaud it for doing so. A closer and, most importantly, intelligent alignment of national tax policies is essential if the EU is to stay relevant as a global business location.

At the same time, it’s not a matter of tax policy integration at any price. We need to strike a balance between European integration and national characteristics.

We need more tax integration. For example, a simplification and standardisation of withholding tax would facilitate cross-border investment in Europe. VAT legislation also needs to be modernised and the current imbalances affecting the insurance industry removed. And that’s not all: the planned common, consolidated basis for calculating corporate tax is particularly important for companies operating across Europe. The idea is to introduce a formula to breakdown corporate profits among companies’ different locations – the tax level, however, would be set by the member states. This would avoid the unpopular transfer of profits to low-tax countries without impacting tax competition, which is desirable.

However, we do not only need a balance of European and national taxation. The dynamics of the – justified – interest of EU states in an adequate tax base on the one hand and corporate competitiveness and innovative capacity on the other must also work.

Digital tax? EU solutions cannot fix the problem by themselves.

All the concern about unethical, if not wrongful, corporate tax avoidance cannot hide the fact that an overly restrictive tax system impedes economic development. I’m referring to, for example, the discussion about the redistribution of international tax rights, especially in connection with digital companies. Of course, it isn’t acceptable for multinational tech corporations to generate a big chunk of their revenue and profit in Europe, while only paying tax in Europe on a small proportion of it. However, EU solutions cannot fix the problem by themselves. We strongly advocate therefore that the challenges involved in taxing multinationals be addressed at the level of the Organisation for Economic Cooperation and Development (OECD). That may soon be the case: clear proposals are to be expected by year-end.

The permanent sub-committee has a lot of work to do. Find out more about what makes sense (and what doesn’t) from our perspective as insurers by clicking here.

Sincerely yours

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