Members of the European Parliament and representatives of industry are still divided on a European Union law proposal aimed at making major international companies pay taxes in the same way wherever they earn their profits.
Some claim it could take away countries’ own power to decide on their tax rules, and others that it does not go far enough to stop tax dodging and making businesses more transparent.
Submitted in 2023 by the European Commission, the European Parliament is set to vote on November 13 on the EC’s new proposal to harmonise corporate taxation rules across the bloc, known as Business in Europe: Framework for Income Taxation (BEFIT).
The plan aims to make large multinationals calculate their taxable profits under a single EU formula rather than under 27 separate national systems.
Conservative groups in the EP have rejected the plan as an attempt to centralise tax policy. They argue that taxation remains a national competence and that Brussels should not interfere in member states’ fiscal sovereignty.
Their representatives say BEFIT risks adding bureaucracy and eroding the power of elected governments to set their own tax rates.
The EC says the reform would cut cross-border compliance costs by up to 65 per cent and make business taxation fairer and more predictable.
It insists that different national systems create complexity and discourage investment inside the single market. The measure would still need unanimous approval from EU governments to become law.
The European Trade Union Confederation (ETUC) has criticised BEFIT from the opposite direction, calling it too weak.
It said the draft allows profit-shifting for another decade and fails to deliver transparency after an EU court ruling scrapped public registers of company owners.
Socialist and Social Democrat lawmakers by contrast support the EC’s initiative, calling it a long-overdue step to ensure that all large companies, including digital giants, “play by the same rules wherever they operate”.
They say the reform would close loopholes that allow profits to be shifted to low-tax jurisdictions inside the EU and make corporate taxation fairer.
The plan would also cover US tech giants such as Google, Apple and Microsoft, since they make huge profits in Europe.
Even if their headquarters are abroad, their EU branches would have to follow the same profit-calculation rules as European firms. The goal is to prevent them from shifting earnings to low-tax countries and to ensure they pay taxes where they actually do business, the EC says.
The body also highlights that taxation remains a national competence and that any change will depend on unanimous agreement among member states — a hurdle that has stalled previous reform efforts.
The concern of national competence is shared by several EU governments, although the EC says these worries are misplaced because BEFIT would only set common rules for calculating profits, not take away countries’ right to decide their tax rates.
BusinessEurope, the largest business representation to the EU, gave cautious support but said the plan “does not yet deliver” on its promise to simplify rules.
It urged close alignment with the OECD’s Pillar Two regime, a worldwide deal to stop big companies from hiding profits in tax havens. It sets a basic rule that all large businesses must pay at least 15 per cent tax everywhere they work, so they cannot escape by moving money to countries with almost no taxes.
Germany’s BDI industry representation echoed that view, saying BEFIT could boost competitiveness if it were tied to international standards, but warning against extra reporting burdens.
The vote will serve mainly as a political signal before the file returns to EU finance ministers. Any final agreement will depend on whether all 27 member states are prepared to accept a common corporate-tax framework.
