MEPs push for stricter limits against corporate tax avoidance

MEPs push for stricter limits against corporate tax avoidance

MEPs call for more transparency for trust funds and foundations, common rules for “patent box” tax reductions on intellectual property earnings

THE EUROPEAN COMMISSION’S suggestion for a European-wide anti-tax avoidance directive was heralded by political figures at the European Parliament yesterday, but MEPs are still pushing for stricter limits against corporate tax avoidance

The EU anti-tax avoidance directive was welcomed by Parliament in a resolution voted on Wednesday in Strasbourg.

However, MEPs want to push through stricter limits on deductions for interest payments and tougher rules on foreign income.

Clampdown on corporate tax avoidance

MEPs called for more transparency for trust funds and foundations, common rules for “patent box” tax reductions on intellectual property earnings, and an EU blacklist of tax havens and sanctions against uncooperative jurisdictions.

The agreed European Commission proposal builds on the principle that tax should be paid where profits are made and includes legally-binding measures to block the methods most commonly used by companies to avoid paying tax.

It also proposes common definitions of terms like permanent establishment; tax havens, minimum economic substance, transfer prices and a number of other terms hitherto open to interpretation.

Further recommendations include:

  • Drawing up an exhaustive ‘black list’ of tax havens and countries, including those in the Union, complemented with a list of sanctions for non-cooperative jurisdictions and for financial institutions that operate within tax havens.
  • Prohibiting the use of letterbox companies.
  • Swiftly introducing of a common consolidated corporate tax base (CCCTB).
  • Increasing the transparency of trust funds and foundations.
  • Introducing a common method for calculating the effective corporate tax rate in each member state, so as to allow for comparison across the EU.
  • A cross-border tax dispute resolution mechanism with clearer rules and timelines, to be introduced by January 2017.
  • Creating a harmonised, common European taxpayer identification number (TIN) to serve as a basis for effective automatic exchange of information between member states tax administrations.
  • The latest anti-tax avoidance directive reflects the OECD’s action plan to limit tax base erosion and profit shifting (BEPS) and follows a series of recommendations made by European powers to tackle corporate tax avoidance.

Ramping up efforts

In January, the European Commission proposed new rules to restrict companies shifting their profits to low tax jurisdictions as part of a package of measures aimed at curbing multinational companies’ aggressive tax practices.

It called on member states to take a stronger and more coordinated stance against tax avoidance and suggests that tax authorities share tax-related information on multinationals operating in the EU, as agreed by 31 countries in a deal with the OECD.

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

Professional Services Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine

Accounting Firms Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021

Making Tax Digital Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource