The European Union’s executive on Tuesday adopted a plan for a unified corporate tax regime, saying this would add to economic growth and help create a fairer and more sustainable society.
European Commission Vice President Valdis Dombrovskis said the move would “set the foundations for a corporate tax system in Europe that is fit for the 21st century”.
“Taxation needs to keep up to speed with our evolving economies and priorities. Our tax rules should support an inclusive recovery, be transparent and close the door on tax avoidance”, he said in a statement.
The Commission proposed that certain large companies operating in the EU publish their effective tax rates to ensure greater transparency, and also proposed new anti-tax avoidance measures to tackle the abusive use of shell companies.
Its plan will aim to support the EU’s post-pandemic economic recovery by addressing the debt-equity bias in the current corporate taxation, which treats debt financing of companies more favourably than equity financing.
It will encourage companies to finance their activities through equity rather than turning to debt.
The Commission also proposed that member states allow loss carry-back for businesses to at least the previous fiscal year.
This would benefit forms that were profitable in the years before the COVID-19 pandemic, allowing them to offset their 2020 and 2021 losses against the taxes they paid before 2020.