Between 160 billions And 190 billion Euros are annually lost in the European Union (EU) for legal ways to avoid corporate income tax according to the European Parliament.
What is the difference?
Under the “tax avoidance” EP understands all lawful methods to reduce the amount of taxes. It is different from “tax evasion” – this term of the Parliament puts all illegal methods to reduce or non-payment of tax obligations.
The European Commission proposed changes in EU legislation to ensure that companies pay their obligations to the treasury. One idea is business to pay taxes where their profit occurs. The new directive will give precise definitions for business and tax havens, as current legislation allows a lot of room for interpretation. The biggest revenues from corporate income tax is in Germany – more than 71 billion Euros, representing just 2.4% of GDP in 2014 in that country. In Bulgaria revenues from corporate taxes are 0.86 billion Euros, representing 2% of GDP.
In countries like Italy or Greece, where the percentage of evasion of taxes is fairly high, collected corporate taxes are also below the EU average. In 2014 for example in Italy collected 35.05 billion Euros, or 2.2 % of GDP. In Greece the tax revenues of companies are 3.34 billion Euros, representing 1.9 % of GDP.
What is the solution?
European Parliament also stated that Bulgaria is the EU country with the lowest corporate taxes in 2015 – 10%. After this country the next is Cyprus and Ireland (12.5%), Lithuania and Latvia (each 15%). The highest is the tax on the profits of companies in Belgium (34%), Malta (35%) and France (38%).