Currently, in practice, states agree to share taxation powers by means of international conventions that prevent double imposition. A state can also adopt unilateral measures which can, however, undermine its bargaining position with regard to negotiations with its partners. In Belgium, nearly 80 agreements have been signed and are in force (from France to the United States, India and the Philippines), while around 35 others have been signed but are not yet in force or are still at the negotiation stage. “Not bad for a small country”!
These conventions are usually based on a model established by the Organization for Economic Co-operation and Development (OECD), which is very active in matters of international taxation and which offers a reference framework to states. “There is an important commentary on this model. This makes it possible to compare concepts and resolve a certain number of problems, because the same word may not be understood in the same way in one or other of the countries”. The expression “the fight against tax evasion”, for example, is often cited in the press. Isabelle Richelle explains: “There is some confusion here. It is a direct translation of the English term “tax evasion”, which signifies tax fraud in fact! There is a big difference between tax fraud and tax avoidance: fraud supposes a conscious lack of respect for tax law; the concept of tax avoidance looks at the ways in which the tax payer seeks to reduce his tax bill by using tax mechanisms in the best possible way (in his own interest), without violating the tax laws.

The European Union also affects tax laws to its member states. A certain number of rules have already helped to narrow the gap between companies. The Union has some innovative projects in the pipeline, in particular the project known as the Common Consolidated Corporate Tax Base (CCCTB): this is aimed at enabling multinational companies to make a single tax declaration for all their activities in the different countries they are established in (within the European Union), an overall and globalized taxable income which will simplify their tax management tasks. This consolidated tax base will then be shared among the member states who will apply their own level of taxation. The difficulty, naturally, is to establish the rules for sharing this tax base between the different states.

Towards a Common funding pot?

Is this a first step towards a future single European fiscal policy? “Because countries are having difficulty sharing the spoils, the idea of attributing the revenue of the tax to the European Union has been suggested. But it does not seem to be on the agenda”. More generally, the different states are not in favor of this “CCCTB” project. No country wants to run the risk of receiving less tax income than before. Nor does any country want to sacrifice the instruments it uses to separate itself from its neighbors and boost its economy.

Like notional interest, a specificity which is 100% Belgian came into effect in 2006 to replace the coordination centers that appeared in the 1980s and which aimed to attract multinationals by offering them favorable tax rates on the agreement that they set up their financial headquarters in our country. The coordination centers tax regime was condemned by Europe which qualify it as prohibited state aid. An alternative needed to be found which could apply to all companies while remaining attractive for international financial centers established in our country. The technique of notional interest makes it possible to reach these objectives.