Luxembourg's tax evasion: question to Margrethe Vestager

My question today to Margrethe Vestager, member of the European Commission in charge of competition policy, during a debate in the economic and monetary affairs committe of the European Parliament. Inevitably, the subject became the recent revelations abour the scale of the tax agreements concluded between 2002 and 2010 between Luxembourg and more than 300 multinationals to allow them to pay taxes at ridiculously low rates (see previous post)

My question:

Concerning "the breach of competition caused by tax fraud and tax planning, you've just mentioned (...) that you have 4 cases (being investigated in several member states). But we all know what the situation is, and now we have more details, we have more information and it is absolutely shocking.

 

So when you talk about 300 multinationals negotiating with a certain member state, my question is: do you feel that you have the capacity, the legal capacity to address these generalised practices? Because for citizens, and you understand it, it is a bit strange that we go on discussing the details of competition and on the back there are massive state aid through tax exemptions for which there are doubts if we have the legal framework to address it or not. So my question is precisely that: we are at a moment when we cannot go on as previously. Do you feel that through competition instruments you are capable of addressing successfully these permanent breaches of competition, or do you have to have a kind of major radical change, political change, to address these issues because it is impossible politically to go on like this, to be absolutely frank? You said there is no time for complacency, I agree, but is the Commission prepared to lead this fight in a much more radical, strong and honest way than until now?

Margrethe Vestager's answer:

To be radical, means to go to the root of thinks. It is very important to realise that we have two different debates here: we have one debate which is about state aids and distortion of competition, and there I actually feel that yes, there I have the legal capacity. Because tax rulings as such are common practice in member states. The problem of a tax ruling is when the member state accepts that a tax payed by a specific company is being calculated in a favourable way which does not correspond to market conditions, so that this company will have  a more favorable tax treatment than other companies. Then there is a state aid question in terms of fiscal aid. There we have a legal capacity. There we can do something if we can prove our cases. And this is the reason why I find very important to get wiser and to finalise the opened cases because then we'll know much more about the practices. If you talk about tax policies as such, I think that for instance you all know the proposal for a Common Consolidated Corporate Tax Base (CCCTB). The last time I asked, nobody knew if it's still had a pulse. This may be an important first step and of course I do hope that member states and Parliament both take this proposal

up for renewed consideration because I thing that would be a very important step to have a Common Consolidated Corporate Tax Base in order to get more transparency and for those businesses who do not engage in aggressive tax planning. It will be much easier because then they will know and they will not have to engage lawers and tax advisers from the countries in which they are active. And that I think will be new legislation that we actually need, if you're going to go the tax road to avoid some of the situations we have seen over the papers in the last couple of days.