The European Parliament on March 15 backed a proposal for a harmonised corporate tax system – part of a wider effort to create a single, clear and fair EU corporate tax regimen.

With 438 votes to 145 votes, with 69 abstentions, the Common Consolidate Corporate Tax Base (CCCTB) was passed. A separate, complementary measure which creates the basis for the harmonised corporate tax system – the Common Corporate Tax Base (CCTB) – was also approved by 451 votes to 141, with 59 abstentions.

“This is a fabulous opportunity to make a giant leap in the field of corporate taxation – not only would this legislation create a model that is more suitable to today’s economies through the taxing of the digital economy, but it would also halt unfettered competition between corporate tax systems within the single market, by targeting profits where they are made,” said rapporteur on CCCTB, Alain Lamassoure (EPP, FR).

The rapporteur on CCTB, Paul Tang (S&D, NL) said: “National and EU leaders understand that the current corporate tax system is outdated and leaves citizens and small companies worse off. International action is needed to turn the tide. The EU is our best chance to make our tax system more just and more modern”.

According to a European Parliament press release, both measures are aimed at plugging the gaps which have allowed some digital and global companies to drastically reduce their tax bills or avoid paying taxes where they create their profits. This would partly be achieved through proposed benchmarks which would identify whether a firm has a “digital presence” within an EU member state, and is therefore liable for tax.

Parliament also wants the European Commission to set those benchmarks (such as the number of users or the volume of digital content collected) to produce a clearer picture of where a company generates its profits. Personal data is a highly valuable asset mined by companies like Facebook, Amazon and Google to create their wealth, but it is currently not considered when calculating their tax liabilities.

The socialists in the European Parliament issued a statement welcoming the two resolutions.

S&D Euro MP Paul Tang, who has drafted the report on the common corporate tax base, said: “Tech giants such as Facebook, Amazon and Booking.com will feel the consequences of this proposal, and it is high time. Member states are losing billions of euros because their national tax systems require the physical presence of a company. This principle is at odds with today’s reality of digitalisation.”

S&D Group spokesperson on the Common consolidated corporate tax base, Belgian socialist Hugues Bayet described the reform as a “game changer” and the only way to end multinationals’ tax shopping.

In turn, S&D Group spokesperson on economic and monetary affairs, Pervenche Berès, said every year, member states lose between as much as €70bn in tax revenue due to the strategic tax planning of multinationals.

“As Socialists and Democrats, we want a fair and just tax system in Europe. It is high time that taxes are paid where profits are made,” he said.