Tuesday, July 9, 2013

Germany calls on EU to ban 'patent box' tax breaks

Germany's finance minister called on Tuesday for a ban on the so-called "patent box" tax break offered by Britain, Netherlands and some other EU members, which he says results in unfair competition for foreign investment.


Wolfgang Schäuble told reporters he wanted EU finance ministers to review the lower corporate tax rates on profit related to innovations and exploiting patents.

Corporate tax avoidance has become a hot political topic with austerity-weary voters across Europe angered by accusations of tax avoidance levelled against companies including Starbucks, Google and Apple in the past year.

Politicians have promised action and the G20 group of rich economies has commissioned the Organisation for Economic Co-operation and Development to devise ways of tackling corporate profit shifting.

Schäuble said patent box schemes were at odds with EU rules designed to deter discriminatory tax rules. "We have to look at this practice and discuss it in Europe, he said. "That's no European spirit. You could get the idea they are doing it just to attract companies."

Countries that offer them say they encourage innovation and high-value jobs in research and development. Critics see the scheme as state-sanctioned tax avoidance. The schemes can be valuable for companies such as the UK's GlaxoSmithkline.

The pharmaceuticals group has said the UK regime encouraged it to build a new plant in Britain and bring many patents held overseas back into the UK.

Citigroup has estimated GSK's effective tax rate will fall to 21% by 2017, from an estimated 24% in 2013, as a result of the measure. Academics say the ability of companies to operate in one European market and access neighbouring ones without barriers means that, although it is a global issue, tax competition is most fiercely fought in the bloc.

The European Commission wants an approach that would force firms to apportion their EU profit between countries according to a formula based on where staff, assets and sales are based. The British government declined to comment.

theguardian.com

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