European corporate taxation is changing, mainly due to an increasing need to protect corporate tax bases. In 2016, the European Union adopted the Anti-Tax Avoidance Directive. Legislation is already in place in the member states. The European Commission has proposed a directive on a common corporate tax base, at the same time as new tax principles for digital services are being discussed. In a new report from SNS, Mattias Dahlberg, Professor of tax law, analyses this development from a Swedish perspective.
Since a couple of years, the OECD and the G20 are working actively to find ways to protect tax bases from tax evasion and tax avoidance, the so-called Base Erosion and Profit Shifting (BEPS) project. The Anti-Tax Avoidance Directive follows from this work. In Sweden, the implementation of the directive has, among other things, resulted in new rules for income tax deduction in the corporate sector. However, it can be questioned whether some of these rules are compatible with fundamental freedoms of European law.
– There is a risk that the Swedish regulation is too broad in relation to settled case-law, The European Court of Justice has ruled that legislation against tax evasion can only be used for “wholly artificial arrangements”, and must be clear and unambiguous, says Mattias Dahlberg, Professor of tax law at Uppsala University.
Recently, the European Commission has taken the initiative and pushed forward in many fields. This is evident for instance in actions taken against arrangements of state aid that are seen as unlawful. The Commission has proposed directives on a common corporate tax base and a common consolidated corporate tax base. And it has raised the idea that unanimity in tax decisions should no longer be required.
– It is important for Sweden to be well prepared and active in the ongoing process of changing legislation within the field of corporate taxation, says Mattias Dahlberg.
As part of protecting tax bases, the Commission are proposing further harmonization of taxation of digital services and digital platforms. Historically, it has been difficult to tax large international corporate groups such as Google and Facebook. That is why new tax principles are being considered within the EU and the OECD. The idea is that part of the tax should be paid in the country where the digital services are consumed, not necessarily where the company is registered or where research and development is taking place.
– For Sweden, being a small exporting country with a high level of R&D, there is a risk that a considerable amount of tax revenue could be lost to states with a higher number of consumers, says Mattias Dahlberg.
The report is a publication within the SNS research project “Taxes in a Globalised World”.