The European Commission has taken the opportunity in the post-pandemic context to publish a communication on 18 May 2021 in which it sets out its future projects in the field of taxation in the European Union. The communication contains both short and long-term measures that take into account not only the known challenges (environment, population ageing, digitalisation, etc.) but also the economic difficulties that the market is currently facing due to the pandemic.
In addition to setting out, in general terms, the policy that the European Commission intends to adopt on taxation in the coming century, the communication contains a number of more concrete measures that the Commission intends to put into practice over the next two years.
As a first step, the Commission intends to submit a legislative proposal in the course of 2022 that would oblige large companies to publish their effective corporate tax rate. The aim is to increase transparency and allow citizens to check the amount of tax paid in relation to the profit that these companies generate in Europe.
Secondly, the Commission intends to submit a proposal for the ATAD 3 Directive in the fourth quarter of 2021. The objective of this Directive would be to combat the abusive use of shell companies, i.e. companies that have no or minimal substantial presence and no real economic activity in order to reduce tax liability. In this context, the Commission intends to introduce new reporting obligations as well as limiting the tax benefits to these companies, etc.
In addition, the Commission is planning to issue a recommendation for Member States on the domestic treatment of losses, in particular to help companies that have been most economically affected by the pandemic (e.g allow loss carry-back for businesses to at least the previous fiscal year).
Furthermore, the Commission noticed that many businesses are over-indebted so that they face the risk of insolvency. In order to address this problem, the Commission intends to issue in the first quarter of 2022 a legislative proposal to address the debt-equity bias in corporate taxation, via an allowance system for equity financing.
Finally, the Commission briefly presented its project entitled "Business in Europe: Framework for Income Taxation", which aims to harmonize corporate taxation in the European Union and replaces the current project entitled "Common Consolidated Corporate Tax Base".