Fortum has responded on 9 September 2015 to the EU Commission’s public consultation on increasing the transparency of corporate taxation.
According to the EU, there is increased public concern about fair corporate taxation in today’s difficult economic environment. The goal of the consultation is to collect background information from companies to support planning to tackle tax evasion and avoidance.
Fortum has published its tax footprint as part of annual reporting since 2012. We aim to communicate about our operations and its impacts in an open and consistent manner with our stakeholders. We also continuously develop our tax footprint reporting.
Fortum’s key messages related to corporate taxation are:
- In the dialogue about corporate taxation, it should be noted that taxation is always a consequence of successful business, not a reason for doing business. Clear, transparent and predictable taxation is a significant competitiveness factor, although taxation alone never steers investment decisions. On the other hand, an unfavourable tax environment could prevent the realisation of investments or could steer those investments to other countries.
- The goal must be the creation of principles related to the transparency of international taxation. The EU’s unilateral actions weaken the competitiveness of companies operating in the EU.
- The premise is that taxes are paid in the country where the added value has been created.
- Public discussion has focused on the low tax rate of some multinational companies in the EU. Less attention has been given to the significant drawback that, due to varying interpretations of national tax authorities, companies operating in the EU often must pay taxes on the same income in two or more countries. This can create a significant competitive disadvantage for EU companies.
- Appeals and legal processes related to multiple taxation (transfer pricing) are long, laborious and expensive, and tie up a company’s resources. In fact, the EU should first draft a plan of action to improve the predictability of taxation and to prevent double taxation in the EU. National tax authorities should be obligated to mutually agree on the right taxation country prior to the company paying the taxes.
- Understanding corporate taxation and its ramifications requires a technical understanding of tax systems and an understanding of the business to be taxed. Publishing the tax-related details of individual companies does not increase the general understanding. Rather than the details, the focus in publishing tax-related information should be on the clarification of both the overall picture and the operating principles related to the company’s taxation.
- In terms of legal protection of companies, it is important that also tax authorities are obligated to operate more transparently and to publish their own operating principles and the tax policy guidelines driving the decisions of the tax authorities.