Commission presents tax avoidance rules that could hit financial centres

The European Commission has published an anti-tax avoidance package containing several elements to fight base erosion and profit shifting (BEPS), that will work towards a common EU position on tax havens.

Key features include legally-binding measures to block the most common methods used by companies to avoid paying tax, sharing tax-related information on multinationals operating in the EU, and a new EU process for listing third countries that refuse to play fair.

“Collectively, these measures will hamper aggressive tax planning, boost transparency between Member States and ensure fairer competition for all businesses in the single market,” the EC said.

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “Billions of tax euros are lost every year to tax avoidance – money that could be used for public services like schools and hospitals or to boost jobs and growth. Europeans and businesses that play fair end up paying higher taxes as a result. This is unacceptable and we are acting to tackle it. Today we are taking a major step towards creating a level-playing field for all our businesses, for fair and effective taxation for all Europeans.”

The fundamental principle of corporate taxation is that companies should pay tax where they make their profits.

The Commission proposals include an Anti Tax Avoidance Directive with legally-binding measures to tackle some of the most prevalent tax avoidance schemes.

Under the proposed rules, national authorities will exchange tax-related information on multinational companies’ activities, on a country-by-country basis. As such, all member states will have crucial information to identify risks of tax avoidance and to better target their tax audits.

The proposal also contains a Communication on an External Strategy for Effective Taxation. Its aim is to strengthen cooperation with international partners in fighting tax avoidance, enhance EU measures to promote fair taxation globally based on international standards and create a common approach to external threats of tax avoidance. This will help to ensure a fair and level playing field for all businesses and countries.