EC lines up tougher stance on corporate tax avoidance

by Kevin Reed

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19 Nov 2012

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European commission

THE EC WANTS a tougher definition of tax havens, as part of plans to stamp out corporate tax avoidance.

After a number of stories involving high-profile businesses and their corporate tax affairs, culminating in appearances in front of the Public Accounts Committee, the EC wants member states to work together and take a tougher line on tax havens.

Drafts seen by the FT set out plans to set a tougher definition of what constitutes a tax haven, including ditching or suspending double taxation agreements with them – where the agreements intend to stop an entity being taxed twice in different jurisdictions through the use of reliefs.

The EC wants general anti-abuse rules implemented locally, while double taxation agreements could include a new rule where income must be taxed by at least one of the countries involved in each agreement.

But advisors have already questioned how rigorous these new rules could be, particularly where businesses that set up in low tax jurisdictions undertake some economic activity.

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