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Europe takes aim at member states’ tax agreement with multinationals

Multinationals will no longer be able to avoid paying tax by playing one country off another, under new rules drafted by the European Commission.

Every three months, EU countries will be compelled to send one another outlines of any special tax deals they have agreed with cross-border companies.

Countries can then ask for additional details to see if the agreement has implications for them.

The rules will not cover purely domestic tax rulings as these do not have consequences for the internal market or for other member states, the commission says.

The member states had asked for such measures following the LuxLeaks scandal. Commissioner Pierre Moscovici said it was a move towards fairer tax competition in the EU.

“Greater transparency will lead to greater scrutiny, which brings further benefits and should deter countries from offering unreasonable tax rulings, and prevent companies from using rulings to shift profits and avoid taxes. It should encourage a virtuous circle,” he said.

The draft rules would also see EU countries exchange tax rulings that date back 10 years. However, it is not intended that countries could retroactively claim tax for that period.

Ireland has held that it does not provide ‘tax letters’ to companies. The commission has provided a definition that applies unilaterally, irrespective of what a country calls their tax arrangement.

This definition is: “Any communication or other instrument or action of similar effect, given by or on behalf of a member state, regarding the interpretation or application of its tax laws.”

EU officials say Ireland does not not have much to fear from the proposals, including the possibility of getting rid of the ‘double Irish’ loophole.

Mr Moscovici said he will present a comprehensive plan in June to include a revised plan on the common corporate tax base. This, together with the Competition Commission’s decision on Ireland’s tax deal with Apple, could cause more headaches.

Dublin MEP Brian Hayes welcomed the measures but said the individual nature of each country’s tax system had to be recognised.

“It is good news that the commission is pursuing healthy tax competition. But there needs to be a focus on effective corporate tax rates — there is a huge difference between this and the headline rate in some countries.”

‘Commercial secrets’ would cease to be a reason for not exchanging information. The data would be protected as, under EU legislation, tax authorities are obliged to keep secret any information shared between them. Whether it will also be shared with the commission is still unclear.

The commission will be informed about all existing tax rulings and can take action against any country failing to communicate future rulings to other member states. They can also check if it is against state aid rules.

Article Source: http://tinyurl.com/kbwqb42

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