EU Plans New Tax Rules for Companies
January 27 2016 - 9:50PM
Dow Jones News
BRUSSELS—The European Union will propose on Thursday a new set
of rules and common standards aimed at amending corporate tax
legislation across the bloc's 28 countries in an effort to thwart
avoidance schemes and ensure wealthy multinationals pay their fair
share.
The commission's push marks a new attempt by the EU to stop
large-scale corporate tax avoidance in Europe, where governments
are struggling to close budget gaps in the wake of the financial
crisis and assure citizens that large companies are being held
accountable for paying their share of taxes. The bloc also is
reeling from disclosures that multinational companies struck
alleged sweetheart deals in countries such as Luxembourg that
allowed them to pay very little tax in the EU.
In response to a public outcry, the EU has launched a series of
investigations into special tax deals with multinationals, based on
its powers to bar governments from providing aid that favors some
companies over others.
The proposals due Thursday from the European Commission, the
EU's executive arm, aim to close loopholes that allow large
companies to shift profit and avoid footing large tax bills.
The rules also would require multinationals to report their
financial results in all the countries in which they operate,
building on proposals from the Organization for Economic
Cooperation and Development, a group of rich-country
governments.
"We are taking another major step to creating a level playing
field for all business, that of fair and effective taxation for all
Europeans," said Pierre Moscovici, the EU's tax chief. "Our
anti-tax-avoidance package will help EU countries to protect their
tax bases, to create a stable environment for business and to
preserve EU competitiveness."
The European Parliamentary Research Service estimates that
corporate tax avoidance results in a loss of tax revenue to the EU
of about €50 billion ($54.5 billion) to €70 billion each year.
The new rules also aim at discouraging multinationals from
employing so-called "excessive debt financing" to reduce their tax
bills—whereby they shift their debt to countries where interest is
tax deductible. The commission will propose setting an upper limit
the amount of interest a company can claim as tax-deductible.
Under another proposed rule, large companies will be forced to
report their revenue, profit and taxes with the relevant
authorities in all the countries in which they operate so that they
can pay their fair share of tax.
The move is likely to raise concerns among U.S. companies that
they are being targeted in Europe. A statement from American
Innovation Matters—a group that includes U.S. companies Cisco
Systems Inc., Boeing Co., Apple Inc., Intel Corp., and Facebook
Inc.—described the EU proposal as "the latest example of the
aggressive moves being made abroad in an effort to tax even more
American earnings, and use them to pad the coffers of foreign
governments."
The EU has struggled for years to close tax loopholes because
all EU countries must agree unanimously on tax matters. But over
the past two years, regulators in Brussels have found another way
around that blockade—by using their powers to enforce the bloc's
state-aid rules that prohibit governments from providing aid to
some companies and not others.
Those powers have allowed Brussels to open a series of
high-profile investigations into alleged sweetheart tax deals for
multinational companies including Apple in Ireland and Amazon.com
in Luxembourg.
Earlier in January, the EU's competition chief said 35
multinationals, including brewer Anheuser-Busch InBev NV, will be
required to pay roughly €700 million in additional taxes in Belgium
after European Union regulators ruled they had benefited from an
illegal tax break.
Meanwhile, Alphabet Inc.'s Google said on Jan. 23 that it has
struck a deal with U.K. authorities to settle a tax dispute and
boost its corporate taxes in Britain, part of a broader effort by
European governments to wring more out of large firms in the tech
sector.
Alongside the proposed new rules, the commission will also make
a recommendation on how EU governments should protect their
bilateral tax treaties with countries in and out of the bloc from
abuse. It will also propose a new EU process for listing third
countries with problematic tax regimes that facilitate
avoidance.
The proposed legislation needs to be agreed unanimously by the
EU's 28 governments before turning into law, a process which can
become contentious and can take months or years.
(END) Dow Jones Newswires
January 27, 2016 21:35 ET (02:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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