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European Commission’s tax proposals are a missed opportunity


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Reaction to European Commission's proposals on tax evasion

Commenting on the European Commission’s new proposals to crack down on tax evasion and avoidance, Diego Zuluaga, the IEA’S Financial Services Research Fellow said:

Today’s announcements amount to little more than the maintenance of a failing regime, and are a missed opportunity to reach the substantial change needed. 

“If adopted, the Commission’s proposals will add new rules to already hugely complex national tax codes – running to 20,000 pages in the UK – and introduce uncertainty about the legality of existing tax treaties. Most worryingly, the Commission is again pushing for the misguided Common Consolidated Corporate Tax Base (CCCTB), a proposal based on the mistaken idea that turnover, employment and assets are adequate proxies for the profits made in a country. They are not. 

“Corporate income taxes across the EU were devised at a time when capital was less mobile and trade restricted by protectionism. Technological innovation and trade have changed the world in the meantime, and public policy should change with it.

“Rather than tinkering with obsolete structures, we should start from first principles and ask ourselves: What do we wish to tax? If the answer is multinationals’ profits, then a tax on dividends paid to shareholders will do. If we want firms to pay for using public services such as roads, policing and our legal system, then we could charge them directly for those services. But it is delusional to think that the current system of international taxation can be saved by introducing more complexity. It is distortionary, it is unfair and it belongs to the past.”

Notes to editors:

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