After sustained campaigning, S&Ds secured the adoption of a minimum effective tax rate in the EU for big multinationals, which finally happened in 2022. The new tax rate of 15% will reduce tax competition between countries and yield an estimated €48 billion annually in additional tax revenues for the EU, to finance the transition.
The S&Ds and progressive allies delivered on a solidarity contribution on the profits of energy companies. Whilst not a new tax, this contribution by energy companies will provide financial support to households and mitigate the effects of high retail electricity prices.
The fight against tax havens: through numerous resolutions, S&Ds have led efforts in the Parliament to push for the reform of the EU mechanism to assess and list tax havens.
Under the S&D Group’s leadership, the EU adopted a law on public country-by-country reporting, which forces large multinationals to reveal where they make their profits and where they pay their taxes. With the S&Ds’ support, the EU also broadened information sharing between tax administrations, covering digital platforms and crypto-assets.
The S&Ds led efforts to create the sub-committee on tax matters, a permanent committee of MEPs to focus on tax reform. For instance, following pressure from the sub-committee, the Commission proposed new rules to deny tax benefits to shell companies in the EU.
With the S&Ds’ support, the EU financed the creation of the European Tax Observatory, which conducts innovative research on taxation and fosters a dialogue between the scientific community, civil society, and policymakers in the EU and worldwide.
From the beginning of this legislative term, S&Ds advocated for the introduction of an 18% minimum effective tax rate across the EU to stop profit shifting to low tax rates jurisdictions. Other priorities involve targeting shell companies that exist only on paper, designed solely to lower the tax bill, and introducing measures to ensure appropriate taxation of super profits generated during crises. Additional measures are also required to tackle unfair tax incentives.
We need a progressive taxation package capable of both delivering the Green New Deal and tackling rising socio-economic inequalities. There are far too many inconsistencies in current tax rules. For example, it is not fair that airlines do not pay tax on kerosene, while workers have to pay extra taxes for their commutes. We should make big polluters, like the maritime and aviation sectors, contribute their fair share and give ecological transport options the boost they deserve.
The benefits of the single market have disproportionately gone to large corporations and the wealthy as they can abuse tax law differences in EU countries, and pay taxes wherever the rates are lowest. Under EU Treaties, finance ministers must agree unanimously on tax policies at a European level. As a result, a single country, including any EU tax haven, can block reforms to change the status. To make rapid progress on tax justice in the EU, we must shift to qualified majority voting on some tax-related issues in the Council.
Concentration of wealth has increased in the past decades and inequality has risen. The wealth at the top does not trickle down. On average, the 10% of wealthiest households in most developed countries hold half of the total wealth; while the 40% least wealthy own little over 3%. But addressing this inequality means making sure that capital and wealth cannot be moved around between member states to benefit from tax breaks. We need strong measures to stop the abuse. Taxes on capitals (dividends and capital gains taxes) should be aligned with taxes on income, starting with a minimum capital gains tax framework at an EU level. The Commission could issue guidance for EU member states willing to establish taxes on capital/net assets to avoid divergences within the EU. In 2023, a European Citizens’ Initiative on wealth taxation, launched by an S&D member of the European Parliament (MEP) and allies, was accepted by the European Commission.
The advent of digitalisation has ushered in significant progress, particularly by granting individuals the freedom to work from virtually anywhere. However, this newfound flexibility has important tax implications, as personal income tax traditionally depends on one’s place of residence. It is crucial that remote work continues to be a choice and a benefit for workers, rather than a tool for companies to engage in tax avoidance strategies. Addressing the taxation of digital nomads and the proliferation of tax incentives addressed to them must become a priority at the European Union level, ensuring fairness and clarity in an increasingly borderless work landscape.
