Nations join forces to urge EU to ban tax competition

France, Germany and Italy have joined forces to outlaw tax competition between EU countries in a letter to the European Commission. 

Ireland depends on maintaining a tax regime that is more attractive than its larger competitors to attract foreign multinationals.

Finance Minister Michael Noonan has repeatedly said he believes in tax competition, while he has also changed elements of the system seen as conferring tax-haven status on Ireland.

But the language and tone in the joint letter to the new Economic and Taxation Commissioner, Pierre Moscovici, is much more aggressive than in the past.

Ireland is working with the EU and the OECD countries to remove elements that allow companies to play one country’s tax regime against another.

But the letter from the finance ministers of the eurozone’s three largest economies says that “the lack of tax harmonisation in the European Union is one of the main causes allowing aggressive tax planning, base erosion and profit-shifting to develop”.

Good progress has been made in the past six months, the letter says, but now a turning point has been reached on unfair tax competition and profit-shifting within the EU that undermines the internal market.

In a reference to the revelations about Apple’s tax arrangements in Ireland and other multinationals’ status in the Netherlands and Luxembourg, the letter says: “Since certain tax practices of countries and taxpayers have become public recently, the limits of permissible tax competition between member states have shifted. This development is irreversible.”

MEP Brian Hayes, former junior finance minister, described the letter as “the French/German axis putting down a marker” with the new commission.

“We are all fed up with the tut-tutting of big member states who have extraordinary tax arrangements in place — you would need to be a philosopher to understand the many discounts that, in effect, reduce companies’ taxation in France to zero,” he said.

Vanessa Mock, commission spokeswoman said Mr Moscovici “welcomes these significant contributions to the work being carried out by the commission”.


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