EU extends corporate tax avoidance measures

21 Feb 17

The European Council has agreed fresh measures to prevent corporations avoiding tax via countries that are not members of the European Union.


Last year, rules to stop multinational companies from exploiting gaps in the legislation of EU member states or special arrangements granted by a national government to shirk their tax dues were developed. Those rules will now be extended to cover similar loopholes in the laws of EU and non-EU countries.

Pierre Moscovici, commissioner for economic affairs, customs and taxation at the EU executive, described the move as “yet another success story” in the bloc’s anti-tax avoidance efforts.

“Step by step, we are eliminating the channels used by certain companies to escape taxation. I congratulate member states for agreeing on this tangible measure to clamp down on tax abuse and install a fairer tax environment in the EU.”

The regulation, the main element of which will come into force in January 2020, will target what are known as “hybrid mismatches” – differences in national laws that international companies can take advantage of.

A hybrid mismatch could enable a country to, for example, claim tax deductions in two countries at the same time.

The European Commission said the extension of the rules will mean that such mechanisms cannot be used to avoid tax in the EU, even where the company’s arrangements involve third countries.

Finance and economics ministers from the bloc’s members agreed on the proposals at a meeting yesterday after they were put forward just under four months ago by the commission.

In a statement, the European parliament’s Progressive Alliance of Socialists and Democrats welcomed the news.

“Hybrid mismatch arrangements are frequently used by the largest companies with the sole purpose of reducing taxation,” said Olle Ludvigsson, the alliance’s spokesperson on the EU’s anti-tax avoidance directive.

“We have seen it in both the Apple case and the McDonald’s case. It is about time that these corporations pay their fair share of taxes.”

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