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February 22, 2017

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EU agrees to fight MNC tax avoidance

EUROPEAN Union finance ministers agreed yesterday to close loopholes multinational corporations use to skip taxation on dividends, part of a drive to stop them from parking profits where they pay the least tax.

The new rules, due to go into effect in 2020, should help the EU recoup revenues from companies that cut their tax bills by declaring profits in countries with low or no taxation.

Tax-saving schemes used by Apple, Amazon, Google, Starbucks and other companies — all legal under current laws — have raised public pressure for EU-wide rules to close these loopholes.

“We have reached a general approach,” Finance Minister Edward Scicluna of Malta, which holds the current six-month rotating EU presidency, said after the deal was reached.

He called it a “bold step” to reduce these tax differentials, known in EU jargon as hybrid mismatches.

“The agreement reached today will ensure that hybrid mismatches of all types cannot be used to avoid tax in the EU, even where the arrangements involve third countries,” the European Commission said.

The deal postponed application of the new rules by one year to January 2020 because some countries noted possible negative consequences on competitiveness if changes were too quick. In some limited cases, the new rules will apply from 2022.

In December, the finance ministers failed to agree on the issue after some of them said a proposal by the then Slovak presidency and backed by Britain would water down the plan.

In a bid to quell multinationals’ concerns, Scicluna said there would be new proposals in coming months.


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