EU Antitrust Commission Looking Into Corporate Tax Loopholes

Corporate tax loopholes have come under considerable scrutiny in recent months, especially following the global crisis. Governments are looking for ways to help ensure that they are gathering as much tax as possible, and ensuring that companies and high wealth individuals do not avoid the payment of their taxes. In the UK, high profile instances, involving celebrities and major corporations have hit the headlines, angering many people. The EU Antitrust Commission is the latest group to jump into the argument, saying that they are investigating whether corporate tax loopholes that enable businesses to cut their tax bills are anti-competitive in their nature.

Major corporations like Amazon and Apple have hit the headlines because of the minimal rates of corporate tax that they are paying. The companies argue that they are operating within tax laws, while governments claim that it is immoral and wrong to avoid paying appropriate tax levels.

Because loopholes exist, it means that these corporations are within their rights to pay less tax. What’s more, as a business, it can be considered a requirement that they attempt to maximise profits, and one effective way to do this is to pay less corporate tax. Expenditure drops, and this puts profits up, or minimises losses. Businesses and businesspeople will argue that it is their right and responsibility to do exactly this.

However, governments have a different view. They require the money raised from corporate tax to fund public spending, so when organisations like Apple and Starbucks pay paltry taxes, they become riled. The question of whether such companies should be named and shamed for exploiting loopholes isn’t enough to temper treasuries and governments from attempting to shame organisations into paying more tax.

If the anti-trust commission determines that paying less tax by using legal loopholes limits competition, then the question of whether it is moral or immoral, and whether it should be legal or illegal will be moot. Governments and the EU will effectively have the power to prevent some of the world’s largest organisations from paying minimal taxes, because steps can be taken to ensure that competition remains in the open marketplace.

About the Author