Brussels, 20/11/2012 (Agence Europe) - On 5 December 2012 the European Commission will be publishing a range of proposals as part of the fight against tax evasion, corporate tax avoidance and tax havens whereby companies are able to pay very little company tax by taking advantage of differences in tax legislation and tax rates in various member states (and other countries), which costs a total of nearly €60 billion a year in lost tax revenue to the EU member states.
From information already released by EU Tax Commissioner Algirdas Semeta and information in the business press, the proposals will include a recommendation that member states introduce a common, tougher definition of what constitutes a tax haven, and then scrap or suspend existing double taxation agreements with such countries, meaning that companies would no longer be able to use them to avoid taxes. The tougher legislation would be based on the EU's code of conduct for business taxation whose criteria for identifying tax havens include not just lack of transparency and refusal to exchange information, but also practices such as offering certain tax benefits only to non-resident companies. The Commission is also recommending two further steps to prevent companies shopping around in order to pay the least tax, namely a) member states should include a general anti-abuse clause in their national legislation that would allow the tax authorities to disregard any corporate arrangements deemed to serve tax purposes rather than commercial purposes; and b) in order to prevent “double non-taxation”, member states should insert a clause into their double taxation agreement specifying that one country is precluded from taxing income only if that income is taxed in the other contracting state.
Introducing these measures would help restrict some corporate tax evasion by multinationals that artificially shift profits to subsidiaries around the world and in different member states to wriggle out of paying tax in a perfectly legal manner, taking advantages of loopholes in tax legislation in the different nations and incentives provided by countries to attract investment. In addition, the Commission will unveil other legislation, currently in deadlock, to ensure more uniform investment and taxation conditions across the single market in the form of a common consolidated tax basis for corporate tax in Europe. (FG/transl.fl)