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THE STATE OF THE EUROPEAN UNION
78
of the United States and Japan. The Instituto de
Estudios Fiscales and the Instituto de Economía
de Barcelona (IEB Report 3/204.) calculate that
the total money lost to tax fraud in Spain 2012-
2013 was equivalent to 20% of that country’s
total tax revenue for the same period.
The recent spate of tax evasion scandals in-
volving large corporations, politicians and celeb-
rities has provoked both public alarm and in-
tense political debate. The US Security Exchange
Commission has criticised manoeuvres by tech
giants Apple and Google that have lowered
their effective tax rates to on foreign earnings to
2.5% and 3% respectively. The US Senate even
summoned executives from Apple, currently the
world’s richest company, to a public hearing at
which they were asked to explain the minimal
taxes that the firm pays on its non-US earnings.
As the OECD pointed out in its initial BEPS
3
re-
port released in February 2013, the effective
corporate rate of large corporations is often as
low as 5%. According to the most recent an-
nual revenue report issued by the Spanish
National Tax Agency (AEAT), the effective cor-
porate tax rate
4
paid by that country’s largest
companies in 2013 was, on the average, 5.3%.
However, it would be the outbreak of the
Lux Leaks scandal in November 2014 that would
unleash the greatest furore in the EU to date
regarding tax avoidance. Information leaked by
the International Consortium of Investigative
Journalists revealed that 340 companies had
signed secret, preferential agreements with tax
authorities in Luxembourg that, on the average,
3
As defined by the OECD, Base Erosion and Profit Shifting
(BEPS) “refers to tax planning strategies that exploit gaps
and mismatches in tax rules to shift profits to low or no-tax
locations where there is little or no economic activity.”
4
Effective corporate tax rate is calculated by dividing the
total tax paid by a company by the amount of its profits
before deductions and exemptions are applied.
lowered their tax rates to 2%, although a few
managed to reach deals that lowered their rate to
a mere 1%. It must be kept in mind that the aver-
age statutory corporate rate in the EU is 22%. In
Spain, it has been lowered from 30 % to 28%
and will be reduced again next year to 25%.
In the wake of these revelations, the
European Parliament is preparing two reports
on tax evasion that focus on the thorny issue of
preferential tax regimes conceded to certain
transnational companies by some Member
States. The European Commission has also
opened its own investigations into the corpo-
rate tax practices in Luxembourg, The
Netherlands Ireland and Belgium to determine
whether they comply with EU rules on state aid.
EU and international initiatives to combat
aggressive tax planning on the part of
multinational companies
Firstly, it must be remembered that according to
EU Treaties
5
, taxation continues to be a primarily
national competence. The European Union still
plays a secondary role in this area and adopts its
decisions on the basis of unanimous vote, a fact
that hinders progress on sensitive issues.
However, the EU can justify interventions
geared towards coordinating the tax systems of
States within the Union and ensuring their na-
tional tax systems are consistent with objectives
laid out in the Treaties. There is a legal basis for
Community-level intervention in response to tax
measures or practices adopted by a given
5
Article 4 of the Treaty of the European Union establishes
that “competences not conferred upon the Union in the
Treaties remain with the Member States” (principle of con-
ferred competences).