Article

EU tightens screw on corporate tax dodgers


Added on 23/02/2017

(BRUSSELS) - The EU continued its fight to close tax avoidance loopholes Tuesday, as finance ministers agreed their position on rules to close down 'hybrid mismatches' with the tax systems of third countries, reports EU Business.

The draft directive, the latest of a number of anti-tax avoidance measures, is aimed at closing down 'hybrid mismatches', mismatches between EU tax systems and those of non-EU countries commonly used by corporate tax dodgers.

It seeks to prevent multi-nationals from exploiting disparities between two or more tax jurisdictions in order to reduce their overall tax liability. The EU sees such arrangements as resulting in a substantial erosion of the taxable bases of corporate taxpayers in the EU.

Despite some compromises, the result should give another tool to tax authorities to recoup lost revenues, said Commissioner Valdis Dombrovskis at the press conference following the meeting: "Clearly, tax avoidance is an issue about which governments and Member States feel very strongly, he said. For us, it's another piece of the puzzle in ensuring effective taxation for big companies in the EU."

"Today is yet another success story in our campaign for fairer taxation" added Commissioner Pierre Moscovici: "Step by step, we are eliminating the channels used by certain companies to escape taxation."

Ministers compromised on the following issues:

for hybrid regulatory capital, a carve-out from the rules is established for the banking sector. The carve-out will be limited in time, and the Commission will be asked to present a report assessing the consequences;

for financial traders, a delimited approach is followed in line with that followed by the OECD;

as regards implementation, a longer timeline is foreseen than that set for the July 2016 directive. Implementation is set for 1 January 2020 (one year later), and for 1 January 2022 as concerns one specific provision.

 

The Council can now adopt the directive once the European Parliament has given its opinion. Then, EU Member states will have until 31 December 2019 to transpose the directive into national laws and regulations.