EU to unveil anti-tax-avoidance package to curb aggressive corporate tax planning

Proposals to include curbing of shifting profits to lower-tax countries in EU

EU economics commissioner Pierre Moscovici:  will announce measures designed to stop companies exploiting loopholes in how tax is calculated across borders. Photograph: David Sleator/The Irish Times

EU economics commissioner Pierre Moscovici: will announce measures designed to stop companies exploiting loopholes in how tax is calculated across borders. Photograph: David Sleator/The Irish Times

 

The EU’s clampdown on aggressive corporate tax planning is set to intensify as the European Commission prepares to unveil an anti-tax-avoidance package today in Brussels.

EU economics commissioner Pierre Moscovici will announce measures designed to stop companies exploiting loopholes in how tax is calculated across borders, the latest attempt by Brussels to tackle aggressive tax planning.

Among the main proposals will be an initiative to curb the practice whereby companies in the EU shift their profits for the purposes of taxation to lower-tax countries in the EU, a custom highlighted earlier this week following Google’s £130 million (€170 million) settlement with British tax authorities. The US firm has been shifting profits deriving from UK sales to Ireland for tax purposes.

Today’s proposal will also suggest a limit to the amount of interest a company can claim each year as tax-deductible on debt payments. An emphasis on tax treaties with so-called “third” (non-EU) countries is also expected to feature, as well as the already-announced automatic exchange of information on tax rulings agreed by EU member states last year.

The revised Common Consolidated Corporate Tax Base (CCCTB) proposal will not be included in today’s package, but will be published in the autumn.

The package must be approved by the council which represents member states. Ireland, along with a number of countries, is likely to oppose any measures that go beyond the standards enshrined in the OECD Base Erosion and Profit Shifting rules agreed last November.

Negotiation of details

European Union

While the commission’s anti-tax-avoidance package does not impinge on countries’ corporate tax rates, the proposed EU rules represent a significant step towards harmonising EU tax rules.

Unlike the OECD standards, the EU rules will be legislative and binding. The European Commission has been pushing for a collective, EU-wide approach to aggressive tax practices in the wake of the Luxembourg Leaks scandals which revealed how hundreds of companies slashed their tax bills.

Ireland’s corporate tax regime has come under renewed scrutiny this week following the announcement of a merger between US-based company Johnson Controls and Cork headquartered Tyco International.