European Commission publishes proposals to clamp down on corporate tax avoidance schemes.

Thursday 06 December 2012 20.44
Member states are to be encouraged to reinforce their Double Tax Conventions
Member states are to be encouraged to reinforce their Double Tax Conventions

The European Commission has just published new proposals aimed at clamping down on corporate tax avoidance schemes.

EU Commissioner for Taxation Algirdas Semeta said the proposal seeks to address legal technicalities and loopholes which some companies exploit to avoid paying their fair share of tax.

Entitled 'Aggressive Tax Planning', member states are to be encouraged to reinforce their Double Tax Conventions, to prevent companies paying no tax at all.

The commission also wants what is termed a 'General Anti-Abuse Rule' under which the tax policy would address a company's economic substance, rather than any artificial arrangements for tax avoidance purposes.

The proposals will be considered closely by the Government in case such a move could affect high-tech companies that have their international headquarters in Ireland.

The Commission maintains that tax evasion and avoidance costs member states almost €1 trillion every year - what it described as "a scandalous loss of much-needed revenue".

The proposals, which were requested by EU leaders at a summit last March, include an EU-wide "black list" of tax havens - and plans include to apply pressure on tax havens in other countries.

The measures will next be considered by EU finance ministers and the European Parliament.

The commission will set up new monitoring tools and scoreboards, in order, it says, to maintain momentum in the fight against tax evasion and avoidance.

There has been pressure on Europe to tackle the practice of profit-shifting and "transfer pricing", which allows companies to legally move income earned in one country to another jurisdiction to lower their total tax bill.

The proposals come in response to widely-voiced concerns about the avoidance of tax by global companies such as Google, Microsoft, Amazon, Apple and Facebook.

Measures aimed at tackling the practices would affect countries such as Ireland and Luxembourg, which have corporate tax structures that facilitate multinationals in sending profits offshore.

Google, Apple, Microsoft and Facebook have international headquarters in Ireland, while Amazon's international offices are in Luxembourg.

However the biggest European markets for all those companies are Germany, France and Britain.