On September 26, Emmanuel Macron made a speech on new a vision for Europe. He spoke about the need to harmonize corporate taxes in the European Union, tackle tax avoidance and protect our welfare states. Just one day later President Trump gave a speech on exactly the same topic, albeit with an entirely different message. He vowed to lower corporate taxation for American companies by a whopping 15 percentage points.
Unintentionally, the two speeches give an excellent illustration of the dilemma that countries, and especially EU countries, face. This is a result of a new logic in corporate taxation, in which 20th century tax systems designed for brick-and-mortar industries are no match for the 21st century developments of digitalization and globalisation. The choice is clear. Either countries work together to tackle the ingenious tax avoidance schemes ran by multinationals, or they participate in the cynical race towards the lowest tax rate. [...]
In that sense, the Netherlands sets a bad example, taking a step back from earlier solutions, and thus genuflecting towards Trump’s bogus solution. The new four-party cabinet revealed its plan to reduce the corporate tax rate incrementally from 25 to 21 percent, and even from 20 to 16 percent for the first €200K of profit. Besides that, a 15 percent tax on shareholder dividends will be removed. Any reference to an EU-coordinated effort to modernise the corporate taxation system is missing. All that said, one good thing is that the incoming government wants to introduce a source tax on royalties and interest to counter the Netherlands’ reputation for facilitating letterbox companies.
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